Economies of Scale in the Swiss Nursing Home Industry♣

This paper examines costs in the Swiss nursing home industry, an issue of concern to Swiss policy makers because of the explosion of elderly care costs and the aging of the population. The paper considers estimation of a translog cost function employing panel data for a sample of 36 nonprofit nursing homes operating in Ticino, a canton of Switzerland, over the period 1993-1995. Using a set of dummy variables quality differences are considered. The results of this analysis indicate the existence of economies of scale for most output levels. ♣ Part of this work was done while I was a visiting research fellow at the Center for Health Economics, University of York (Summer 1998). I am grateful to Antonio Giuffrida and Andrew Jones for their comments on earlier versions of this paper and the Dipartimento Opere Sociali, Canton Ticino, for general assistance. The views expressed in this paper are strictly personal. Responsability for any remaining errors lies solely with the author.