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Dynamic Cost-offsets of Prescription Drug Expenditures: Panel Data Analysis Using a Copula-based Hurdle Model

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Author Info
Partha Deb
Pravin K. Trivedi
David M. Zimmer

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Abstract

This paper presents a new multivariate copula-based modeling approach for analyzing cost-offsets between drug and nondrug expenditures. Estimates are based on panel data from the Medical Expenditure Panel Survey (MEPS) with quarterly measures of medical expenditures. The approach allows for nonlinear dynamic dependence between drug and nondrug expenditures as well as asymmetric contemporaneous dependence. The specification uses the standard hurdle model with two significant extensions. First, it is adapted to the bivariate case. Second, because the cost-offset hypothesis is inherently dynamic, the bivariate hurdle framework is extended to accommodate dynamic relationships between drug and nondrug spending. The econometric analysis is implemented for six different groups defined by specific health conditions. There is evidence of modest cost-offsets of expenditures on prescribed drugs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15191.

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Date of creation: Jul 2009
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Handle: RePEc:nbr:nberwo:15191

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Find related papers by JEL classification:
C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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  1. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January. [Downloadable!] (restricted)
  2. Baoping Shang & Dana P. Goldman, 2007. "Prescription Drug Coverage and Elderly Medicare Spending," NBER Working Papers 13358, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Dana Goldman & Tomas Philipson, 2007. "Integrated Insurance Design in the Presence of Multiple Medical Technologies," NBER Working Papers 12870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Manning, Willard G. & Basu, Anirban & Mullahy, John, 2005. "Generalized modeling approaches to risk adjustment of skewed outcomes data," Journal of Health Economics, Elsevier, vol. 24(3), pages 465-488, May. [Downloadable!] (restricted)
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  5. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier. [Downloadable!] (restricted)
  6. Andrew J. Patton, 2006. "Modelling Asymmetric Exchange Rate Dependence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 527-556, 05. [Downloadable!] (restricted)
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  7. Katarzyna Bien & Ingmar Nolte & Winfried Pohlmeier, 2007. "An Inflated Multivariate Integer Count Hurdle Model: An Application to Bid and Ask Quote Dynamics," CoFE Discussion Paper 07-04, Center of Finance and Econometrics, University of Konstanz. [Downloadable!]
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