Political Distortions in Public Hospital Funding

Political Distortions in Public Hospital Funding

Adam Pilny¹ (with Felix Rösel²)

1 RWI Essen

2 ifo Institute, TU Dresden

Investment funding for hospitals in Germany is at the discretion of the federal states, giving leeway for political influence and distortions. We investigate whether government ideology affects the allocation of public capital funds to hospitals of different ownership. We use self-compiled historical data of the German hospital market between 1955 and 2018 and link this information to political data, state budget accounts, and socioeconomics of German states. We estimate regression discontinuity design (RDD) models exploiting close election outcomes where only few pivotal votes led to a left-wing or right-wing government. First results show that left-wing governments disadvantage private hospital providers in capital funding compared to public hospitals. We also investigate whether electoral cycles, economic-trained health ministers and fiscal decentralization play a role.