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Copula Bivariate Probit Models: With An Application To Medical Expenditures

  • Rainer Winkelmann

The bivariate probit model is frequently used for estimating the effect of an endogenous binary regressor (the "treatment") on a binary health outcome variable. This paper discusses simple modifications that maintain the probit assumption for the marginal distributions while introducing non-normal dependence using copulas. In an application of the copula bivariate probit model to the effect of insurance status on the absence of ambulatory health care expen- diture, a model based on the Frank copula outperforms the standard bivariate probit model.

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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 21 (2012)
Issue (Month): 12 (December)
Pages: 1444-1455

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Handle: RePEc:wly:hlthec:v:21:y:2012:i:12:p:1444-1455
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  10. Ziggy MacDonald & Michael A. Shields, 2004. "Does problem drinking affect employment? Evidence from England," Health Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 139-155.
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  13. Wilde, Joachim, 2000. "Identification of multiple equation probit models with endogenous dummy regressors," Economics Letters, Elsevier, vol. 69(3), pages 309-312, December.
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  16. Lara Gitto & Domenico Santoro & Giuseppe Sobbrio, 2006. "Choice of dialysis treatment and type of medical unit (private vs public): application of a recursive bivariate probit," Health Economics, John Wiley & Sons, Ltd., vol. 15(11), pages 1251-1256.
  17. Zimmer, David M. & Trivedi, Pravin K., 2006. "Using Trivariate Copulas to Model Sample Selection and Treatment Effects: Application to Family Health Care Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 63-76, January.
  18. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
  19. Murray D. Smith, 2005. "Using Copulas to Model Switching Regimes with an Application to Child Labour," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages S47-S57, 08.
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