The Impact of Technical Change on Healthcare Production and Efficiency

This article measures the technical efficiency of healthcare production and estimates the impact of technical change on healthcare across OECD countries between 2000 and 2011, based on a 34 country panel data set, extending the study by Fare et al. (1997). The study adopted a DEA (Data Envelopment Analysis) based output-oriented efficiency measure to obtain the productive efficiency of each country for all given years, and used the Malmquist Index to determine the productivity growth and decompose the technical change from efficiency changes over the years. It is found that the production frontier shifted up around 0.8% annually between 2000 and 2011, with a cumulative 8.5% technical and 7.2% productivity increase over the period. Technological progress seems to be stable over time, while most of the fluctuations in productivity growth come from changes in efficiency due to utilization of new technologies.