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Soft budget constraints in China: evidence from the Guangdong hospital industry
Karen Eggleston1, Yu-Chu Shen, Mingshan Lu
1Walter H. Shorenstein Asia-Pacific Research Center, Stanford University, 616 Serra St., Encina Hall E311, Stanford, CA 94305-6055, USA. karene@stanford.edu
Abstract:
Using data from 276 general acute hospitals in the Pearl River Delta region of Guangdong Province from 2002 and 2004, we construct a preliminary metric of budget constraint softness. We find that, controlling for hospital size, ownership, and other factors, a Chinese hospital's probability of receiving government financial support is inversely associated with the hospital's previous net revenue, an association consistent with soft budget constraints.
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