Salary, financial autonomy and efficiency of healthcare systems in local governments

ABSTRACT

The expansion of financial autonomy increased the interest on the factors that influence the efficiency of local governments (LGs). Although fiscal autonomy and employee’s wages have implications for efficiency, research has ignored their combined effects. This work aims to investigate the relation between salary, financial autonomy and the efficiency of LGs' health systems in Brazil. The sample was composed of 188 LGs in the state of Paraíba from 2011 to 2015. The study consisted of a two-stage analysis: (i) efficiency was measured by means of Data Envelopment Analysis; (ii) and multiple regression on panel data. Results demonstrate that (i) the average salary of doctors affected efficiency negatively, while the salary of non-doctors had a positive impact on efficiency; (ii) salary differences between doctors and non-doctors, as well as differences between members within each group, did not impact efficiency; (iii) LG's financial autonomy presented positive effects on efficiency even if not confirmed by all models. Results show that when an increase in salary affected groups receiving smaller salaries, the effect was positive on efficiency, while for groups with higher salaries, such an increase caused a negative impact. Finally, this study suggests that LGs’ greater financial autonomy is positively correlated to greater efficiency in healthcare services.

KEYWORDS:

• Efficiency
• salaries
• public health service
• local governments

JEL CLASSIFICATION:

• H51
• H77
• I18
• J31

Disclosure statement

No potential conflict of interest was reported by the authors.