Volume 9, Number 1 (Winter) 1974
Pauly, Mark V. 1974. "Hospital Capital Investment: The Roles of Demand, Profits, and Physicians." Journal of Human Resources 9(1):7-20.
After considering existing studies of hospital capital investment, this paper analyzes hospital investment with a model based on the assumption that hospitals are run to maximize the incomes of staff physicians. Optimal capital stock is shown to be related to physician income and hospital output. Analysis of a state-aggregate cross-section indicates that investment is a lagged response to output and physician income changes, while profits are not consistently an important determinant.
The author is Associate Professor of Economics, Northwestern University. Research support was provided by the Health Services Research Center of Northwestern University. I am grateful to Winston Lin and Robert Welch for assistance with the computer analysis.
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