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Bayesian analysis of the two-part model with endogeneity: application to health care expenditure

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  • Murat K. Munkin

    (Department of Economics, University of Tennessee, Knoxville, Tennessee, USA)

  • Partha Deb

    (Department of Economics, Hunter College, New York, USA)

  • Pravin K. Trivedi

    (Department of Economics, Indiana University, Bloomington, Indiana, USA)

Abstract

This paper studies the effect of managed care on medical expenditure using a model in which the insurance status is assumed to be endogenous. Insurance plan choice is modeled through the multinomial probit model. The medical expenditure variable, the outcome of interest, has a significant proportion of zeros that are handled using the two-part model, extended to handle endogenous insurance. The estimation approach is Bayesian, based on the Gibbs Sampler. The model is applied to a sample of 20 460 individuals obtained from the Medical Expenditure Panel Survey. The results provide substantial evidence of selectivity. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Murat K. Munkin & Partha Deb & Pravin K. Trivedi, 2006. "Bayesian analysis of the two-part model with endogeneity: application to health care expenditure," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1081-1099.
    • Handle: RePEc:jae:japmet:v:21:y:2006:i:7:p:1081-1099
    DOI: 10.1002/jae.891
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    References listed on IDEAS

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