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Much Ado About Two: Reconsidering Retransformation and the Two-Part Model in Health Economics

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  • John Mullahy

Abstract

In health economics applications involving outcomes (y) and covariates (x), it is often the case that the central inferential problems of interest involve E[y|x] and its associated partial effects or elasticities. Many such outcomes have two fundamental statistical properties: yò0; and the outcome y=0 is observed with sufficient frequency that the zeros cannot be ignored econometrically. Common approaches to estimation in such instances include Tobit, selection, and two-part models. This paper (1) describes circumstances where the standard two-part model with homoskedastic retransformation will fail to provide consistent inferences about important policy parameters; and (2) demonstrates some alternative approaches that are likely to prove helpful in applications.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0228.

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Date of creation: Mar 1998
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Publication status: published as Mullahy, John. "Much Ado Abut Two: Reconsidering Retransformation And The Two-Part Model In Health Econometrics," Journal of Health Economics, 1998, v17(3,Jun), 247-281.
Handle: RePEc:nbr:nberte:0228

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Cited by:
  1. Grossman, Michael, 2004. "The demand for health, 30 years later: a very personal retrospective and prospective reflection," Journal of Health Economics, Elsevier, vol. 23(4), pages 629-636, July.
  2. Ruhm, Christopher J. & Jones, Alison Snow & McGeary, Kerry Anne & Kerr, William C. & Terza, Joseph V. & Greenfield, Thomas K. & Pandian, Ravi S., 2012. "What U.S. data should be used to measure the price elasticity of demand for alcohol?," Journal of Health Economics, Elsevier, vol. 31(6), pages 851-862.
  3. Stefan Boes & Michael Gerfin, 2013. "Does full insurance increase the demand for health care?," Diskussionsschriften dp1305, Universitaet Bern, Departement Volkswirtschaft.
  4. Martin Knapp & Derek King & Andrew Healey & Cicely Thomas, 2011. "Economic outcomes in adulthood and their associations with antisocial conduct, attention deficit and anxiety problems in childhood," LSE Research Online Documents on Economics 38200, London School of Economics and Political Science, LSE Library.
  5. Avi Dor, 2004. "Optimal Price Rules, Administered Prices and Suboptimal Prevention: Evidence from a Medicare Program," Journal of Regulatory Economics, Springer, vol. 25(1), pages 81-104, January.
  6. Christopher Carpenter & Sabina Postolek & Casey Warman, 2011. "Public-Place Smoking Laws and Exposure to Environmental Tobacco Smoke (ETS)," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 35-61, August.
  7. �ngel Marcos Vera-Hernández, 1999. "Duplicate coverage and demand for health care. The case of Catalonia," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 579-598.
  8. Donna B. Gilleskie & Thomas A. Mroz, 2000. "Estimating the Effects of Covariates on Health Expenditures," NBER Working Papers 7942, National Bureau of Economic Research, Inc.
  9. Gabriela Flores & Por Ir & Chean R. Men & Owen O'Donnell & Eddy van Doorslaer, 2011. "Financial Protection of Patients through Compensation of Providers: The Impact of Health Equity Funds in Cambodia," Tinbergen Institute Discussion Papers 11-169/3, Tinbergen Institute.
  10. Gilleskie, Donna B. & Mroz, Thomas A., 2004. "A flexible approach for estimating the effects of covariates on health expenditures," Journal of Health Economics, Elsevier, vol. 23(2), pages 391-418, March.
  11. Batscheider, Ariane & Rzehak, Peter & Teuner, Christina M. & Wolfenstetter, Silke B. & Leidl, Reiner & von Berg, Andrea & Berdel, Dietrich & Hoffmann, Barbara & Heinrich, Joachim, 2014. "Development of BMI values of German children and their healthcare costs," Economics & Human Biology, Elsevier, vol. 12(C), pages 56-66.
  12. Li, Xin & Zhang, Wei, 2013. "The impacts of health insurance on health care utilization among the older people in China," Social Science & Medicine, Elsevier, vol. 85(C), pages 59-65.
  13. Michael Ziegelmeyer, 2013. "Illuminate the unknown: evaluation of imputation procedures based on the SAVE survey," AStA Advances in Statistical Analysis, Springer, vol. 97(1), pages 49-76, January.

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