Second, we examine how far the doubling of administrative expenditure
between 1989r1990 and 1994r1995 is due to shifts in the cost function and
changes in administrative tasks. One of the justifications for the current sweeping
changes in the organisation of the National Health Service is that the introduction
of the internal market and changes to the general practitioner GP contract from Ž .
1990r1991 onward led, amongst other things, to an increase in administration
costs Department of Health, 1997 . By estimating an administrative cost function Ž .
for primary care services we provide some evidence of the possible effect of the
internal market, in particular of the spread of fundholding practices, on administrative
costs in primary care.