The paper begins with an overview of the role of the Mexican state in the investment process during the period 1950-93. The results suggest that the growth in public and private investment spending has had a positive effect on the rate of productivity growth in Mexico. In the late 1980s, the Prospective Payment System and the expansion of managed care plans forced hospitals to be cost efficient. The increased number of hospital mergers suggests that merging is a way to become more efficient to ensure long-run survival. This study presents an economic framework and empirical analysis to test the existence of multiproduct scope and scale economies among merged and control hospitals prior to the merger, and one year and two years after the merger, using the AHA data from 1987 to 1990.
Results support the operational efficiency hypothesis as the reason for merger.
Our model predicts that an increase in tuition sticker price, combined with an increase in institutional financial aid grants, will lead to increases in both net revenue and enrollment. Our overall conjecture is that colleges in recent years have made more and better use of price-discrimination as a response to increasing competitive pressure. Based on simple econometric tests, we conclude that the 1991-95 period of increasing sticker price, aid, enrollment and net revenue is consistent with our model.