IDEAS home Printed from https://ideas.repec.org/p/bol/bodewp/wp921.html
   My bibliography  Save this paper

Testing exogeneity of multinomial regressors in count data models: does two stage residual inclusion work?

Author

Listed:
  • A. Geraci
  • D. Fabbri
  • C. Monfardini

Abstract

We study a simple exogeneity test in count data models with possibly endogenous multinomial treatment. The test is based on Two Stage Residual Inclusion (2SRI). Results from a broad Monte Carlo study provide novel evidence on important features of this approach in nonlinear settings. We find differences in the finite sample performance of various likelihood-based tests under correct specification and when the outcome equation is misspecified due to neglected over-dispersion or non-linearity. We compare alternative 2SRI procedures and uncover that standardizing the variance of the first stage residuals leads to higher power of the test and reduces the bias of the treatment coefficients. An original application in health economics corroborates our findings.

Suggested Citation

  • A. Geraci & D. Fabbri & C. Monfardini, 2014. "Testing exogeneity of multinomial regressors in count data models: does two stage residual inclusion work?," Working Papers wp921, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp921
    as

    Download full text from publisher

    File URL: http://amsacta.unibo.it/3937/1/WP921.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michel Grignon & Marc Perronnin & John N. Lavis, 2008. "Does free complementary health insurance help the poor to access health care? Evidence from France," Health Economics, John Wiley & Sons, Ltd., vol. 17(2), pages 203-219, February.
    2. Partha Deb & Pravin K. Trivedi, 2006. "Maximum simulated likelihood estimation of a negative binomial regression model with multinomial endogenous treatment," Stata Journal, StataCorp LP, vol. 6(2), pages 246-255, June.
    3. Arne Risa Hole, 2006. "Calculating Murphy-Topel variance estimates in Stata: A simplified procedure," Stata Journal, StataCorp LP, vol. 6(4), pages 521-529, December.
    4. Terza, Joseph V. & Basu, Anirban & Rathouz, Paul J., 2008. "Two-stage residual inclusion estimation: Addressing endogeneity in health econometric modeling," Journal of Health Economics, Elsevier, vol. 27(3), pages 531-543, May.
    5. Windmeijer, F A G & Silva, J M C Santos, 1997. "Endogeneity in Count Data Models: An Application to Demand for Health Care," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 281-294, May-June.
    6. Daniele Fabbri & Chiara Monfardini, 2016. "Opt Out or Top Up? Voluntary Health Care Insurance and the Public vs. Private Substitution," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(1), pages 75-93, February.
    7. Deb, Partha & Trivedi, Pravin K, 1997. "Demand for Medical Care by the Elderly: A Finite Mixture Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 313-336, May-June.
    8. Donald S. Kenkel & Joseph V. Terza, 2001. "The effect of physician advice on alcohol consumption: count regression with an endogenous treatment effect," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(2), pages 165-184.
    9. Thomas C. Buchmueller & Agnès Couffinhal & Michel Grignon & Marc Perronnin, 2004. "Access to physician services: does supplemental insurance matter? Evidence from France," Health Economics, John Wiley & Sons, Ltd., vol. 13(7), pages 669-687, July.
    10. Teresa Bago d'Uva & Maarten Lindeboom & Owen O'Donnell & Eddy van Doorslaer, 2011. "Education‐related inequity in healthcare with heterogeneous reporting of health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 174(3), pages 639-664, July.
    11. Hendry, David F., 1984. "Monte carlo experimentation in econometrics," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 16, pages 937-976, Elsevier.
    12. Cameron, A Colin & Windmeijer, Frank A G, 1996. "R-Squared Measures for Count Data Regression Models with Applications to Health-Care Utilization," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 209-220, April.
    13. Ettner, Susan L., 1997. "Adverse selection and the purchase of Medigap insurance by the elderly," Journal of Health Economics, Elsevier, vol. 16(5), pages 543-562, October.
    14. Massimiliano Bratti & Alfonso Miranda, 2011. "Endogenous treatment effects for count data models with endogenous participation or sample selection," Health Economics, John Wiley & Sons, Ltd., vol. 20(9), pages 1090-1109, September.
    15. Alfonso Miranda, 2004. "FIML estimation of an endogenous switching model for count data," Stata Journal, StataCorp LP, vol. 4(1), pages 40-49, March.
    16. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    17. Chai Cheng, T & Vahid, F, 2010. "Demand for hospital care and private health insurance in a mixed publicprivate system: empirical evidence using a simultaneous equation modeling approach," Health, Econometrics and Data Group (HEDG) Working Papers 10/25, HEDG, c/o Department of Economics, University of York.
    18. Lorenzo Cappellari & Stephen P. Jenkins, 2006. "Calculation of multivariate normal probabilities by simulation, with applications to maximum simulated likelihood estimation," Stata Journal, StataCorp LP, vol. 6(2), pages 156-189, June.
    19. Kapetanios, George, 2010. "Testing For Exogeneity In Threshold Models," Econometric Theory, Cambridge University Press, vol. 26(1), pages 231-259, February.
    20. Fabbri, Daniele & Monfardini, Chiara, 2009. "Rationing the public provision of healthcare in the presence of private supplements: Evidence from the Italian NHS," Journal of Health Economics, Elsevier, vol. 28(2), pages 290-304, March.
    21. Geraci Andrea & Fabbri Daniele & Monfardini Chiara, 2018. "Testing Exogeneity of Multinomial Regressors in Count Data Models: Does Two-stage Residual Inclusion Work?," Journal of Econometric Methods, De Gruyter, vol. 7(1), pages 1-19, January.
    22. Pagan, Adrian & Vella, Frank, 1989. "Diagnostic Tests for Models Based on Individual Data: A Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages 29-59, Supplemen.
    23. Kevin E. Staub, 2009. "Simple tests for exogeneity of a binary explanatory variable in count data regression models," SOI - Working Papers 0904, Socioeconomic Institute - University of Zurich.
    24. Peter Haan & Arne Uhlendorff, 2006. "Estimation of multinomial logit models with unobserved heterogeneity using maximum simulated likelihood," Stata Journal, StataCorp LP, vol. 6(2), pages 229-245, June.
    25. Jason Abrevaya & Jerry A. Hausman & Shakeeb Khan, 2010. "Testing for Causal Effects in a Generalized Regression Model With Endogenous Regressors," Econometrica, Econometric Society, vol. 78(6), pages 2043-2061, November.
    26. Partha Deb & Pravin K. Trivedi, 2006. "Specification and simulated likelihood estimation of a non-normal treatment-outcome model with selection: Application to health care utilization," Econometrics Journal, Royal Economic Society, vol. 9(2), pages 307-331, July.
    27. Bhat, Chandra R., 2001. "Quasi-random maximum simulated likelihood estimation of the mixed multinomial logit model," Transportation Research Part B: Methodological, Elsevier, vol. 35(7), pages 677-693, August.
    28. John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
    29. Joseph V. Terza, 2016. "Simpler standard errors for two-stage optimization estimators estimation in normal linear models," Stata Journal, StataCorp LP, vol. 16(2), pages 368-385, June.
    30. Michel Grignon & Bidénam Kambia-Chopin, 2009. "Income and the Demand for Complementary Health Insurance in France," Working Papers DT24, IRDES institut for research and information in health economics, revised Apr 2009.
    31. van Ophem, Hans, 2000. "Modeling Selectivity in Count-Data Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 503-511, October.
    32. David Zimmer, 2010. "Health Insurance and Health Care Demand Among the Self-employed," Journal of Labor Research, Springer, vol. 31(1), pages 1-19, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Here's Your Reading List!
      by Dave Giles in Econometrics Beat: Dave Giles' Blog on 2014-12-02 00:12:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bian Liu & Serena Zhan & Karen M. Wilson & Madhu Mazumdar & Lihua Li, 2021. "The Influence of Increasing Levels of Provider-Patient Discussion on Quit Behavior: An Instrumental Variable Analysis of a National Survey," IJERPH, MDPI, vol. 18(9), pages 1-11, April.
    2. Qing Wang & Huyang Zhang & John A. Rizzo & Hai Fang, 2018. "The Effect of Childhood Health Status on Adult Health in China," IJERPH, MDPI, vol. 15(2), pages 1-16, January.
    3. Lee Roberts & Monomita Nandy & Abeer Hassan & Suman Lodh & Ahmed A. Elamer, 2022. "Corporate Accountability Towards Species Extinction Protection: Insights from Ecologically Forward-Thinking Companies," Journal of Business Ethics, Springer, vol. 178(3), pages 571-595, July.
    4. Besancenot, Damien & Huynh, Kim & Serranito, Francisco, 2017. "Co-authorship and research productivity in economics: Assessing the assortative matching hypothesis," Economic Modelling, Elsevier, vol. 66(C), pages 61-80.
    5. Sauveur Giannoni & Daniel Brunstein & Florian Guéniot & Johan Jouve, 2021. "Multichannel distribution strategy of Airbnb hosts," Post-Print hal-03216572, HAL.
    6. Damien Besancenot & Kim Van Huynh & Francisco Serranito, 2015. " Thou shalt not work alone ," CEPN Working Papers hal-01175758, HAL.
    7. Hakaru Iguchi & Hajime Katayama & Junichi Yamanoi, 2022. "CEOs’ religiosity and corporate green initiatives," Small Business Economics, Springer, vol. 58(1), pages 497-522, January.
    8. Guillermo Briseño Sanchez & Maike Hohberg & Andreas Groll & Thomas Kneib, 2020. "Flexible instrumental variable distributional regression," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 183(4), pages 1553-1574, October.
    9. Maike Hohberg & Peter Pütz & Thomas Kneib, 2020. "Treatment effects beyond the mean using distributional regression: Methods and guidance," PLOS ONE, Public Library of Science, vol. 15(2), pages 1-29, February.
    10. Geraci Andrea & Fabbri Daniele & Monfardini Chiara, 2018. "Testing Exogeneity of Multinomial Regressors in Count Data Models: Does Two-stage Residual Inclusion Work?," Journal of Econometric Methods, De Gruyter, vol. 7(1), pages 1-19, January.
    11. Canan GÜNEŞ & Mustafa ÜNLÜ & Yasin BÜYÜKKÖR & Şenay ÜÇDOĞRUK BİRECİKLİ, 2016. "Türkiye’de Sağlık Hizmetleri Talebinin Sayma Veri Modelleriyle İncelenmesi: İçsellik Sorunu," Sosyoekonomi Journal, Sosyoekonomi Society, issue 24(30).
    12. Damien Besancenot & Kim Huynh & Francisco Serranito, 2015. "Co-Authorship And Individual Research Productivity In Economics: Assessing The Assortative Matching Hypothesis," CEPN Working Papers halshs-01252373, HAL.
    13. Damien Besancenot & Kim Huynh & Francisco Serranito, 2015. "Co-Authorship And Individual Research Productivity In Economics: Assessing The Assortative Matching Hypothesis," Working Papers halshs-01252373, HAL.
    14. Damien Besancenot & Kim Van Huynh & Francisco Serranito, 2015. " Thou shalt not work alone ," Working Papers hal-01175758, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Canan GÜNEŞ & Mustafa ÜNLÜ & Yasin BÜYÜKKÖR & Şenay ÜÇDOĞRUK BİRECİKLİ, 2016. "Türkiye’de Sağlık Hizmetleri Talebinin Sayma Veri Modelleriyle İncelenmesi: İçsellik Sorunu," Sosyoekonomi Journal, Sosyoekonomi Society, issue 24(30).
    2. Daniele Fabbri & Chiara Monfardini, 2016. "Opt Out or Top Up? Voluntary Health Care Insurance and the Public vs. Private Substitution," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(1), pages 75-93, February.
    3. Partha Deb & Pravin K. Trivedi, 2012. "Empirical Models of Health Care Use," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 14, Edward Elgar Publishing.
    4. Massimiliano Bratti & Alfonso Miranda, 2011. "Endogenous treatment effects for count data models with endogenous participation or sample selection," Health Economics, John Wiley & Sons, Ltd., vol. 20(9), pages 1090-1109, September.
    5. Terence Chai Cheng, 2011. "Measuring the Effects of Removing Subsidies for Private Insurance on Public Expenditure for Health Care," Melbourne Institute Working Paper Series wp2011n26, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. Cheng, Terence Chai, 2014. "Measuring the effects of reducing subsidies for private insurance on public expenditure for health care," Journal of Health Economics, Elsevier, vol. 33(C), pages 159-179.
    7. Massimiliano Bratti & Alfonso Miranda, 2010. "Endogenous Treatment Effects for Count Data Models with Sample Selection or Endogenous Participation," DoQSS Working Papers 10-05, Quantitative Social Science - UCL Social Research Institute, University College London, revised 10 Dec 2010.
    8. Chai Cheng, T & Vahid, F, 2010. "Demand for hospital care and private health insurance in a mixed publicprivate system: empirical evidence using a simultaneous equation modeling approach," Health, Econometrics and Data Group (HEDG) Working Papers 10/25, HEDG, c/o Department of Economics, University of York.
    9. Emilio Parrado & Chenoa Flippen & Chris McQuiston, 2005. "Migration and relationship power among mexican women," Demography, Springer;Population Association of America (PAA), vol. 42(2), pages 347-372, May.
    10. Andrés Ramírez Hassan & Johnatan Cardona Jimenez & Ramiro Cadavid Montoya, 2011. "The impact of subsidized health insurance on the poor in Colombia: Evaluating the case of Medellin," Documentos de Trabajo de Valor Público 10602, Universidad EAFIT.
    11. Andr? Romeu-Santana & ?gel M. Vera-Hern?dez, "undated". "A Semi-Nonparametric Estimator For Counts With An Endogenous Dummy. Variable," UFAE and IAE Working Papers 452.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    12. Omar Paccagnella & Vincenzo Rebba & Guglielmo Weber, 2013. "VOLUNTARY PRIVATE HEALTH INSURANCE AMONG THE OVER 50s IN EUROPE," Health Economics, John Wiley & Sons, Ltd., vol. 22(3), pages 289-315, March.
    13. Becker, Gideon, 2014. "The portfolio structure of German households: A multinomial fractional response approach with unobserved heterogeneity," University of Tübingen Working Papers in Business and Economics 74, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    14. Richardson, Leslie A. & Champ, Patricia A. & Loomis, John B., 2012. "The hidden cost of wildfires: Economic valuation of health effects of wildfire smoke exposure in Southern California," Journal of Forest Economics, Elsevier, vol. 18(1), pages 14-35.
    15. Hongxiu Li, 2017. "Innovation as Adaptation to Natural Disasters," Working Papers 1709, University of Waterloo, Department of Economics, revised Nov 2017.
    16. Andrés Romeu & Marcos Vera-Hernández, 2005. "Counts with an endogenous binary regressor: A series expansion approach," Econometrics Journal, Royal Economic Society, vol. 8(1), pages 1-22, March.
    17. Perronnin, Marc, 2013. "Effet de l'assurance complémentaire santé sur les consommations médicales, entre risque moral et amélioration de l'accès aux soins," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/13659 edited by Wittwer, Jérôme.
    18. Kevin E. Staub, 2009. "Simple tests for exogeneity of a binary explanatory variable in count data regression models," SOI - Working Papers 0904, Socioeconomic Institute - University of Zurich.
    19. Ángel 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, November.
    20. Michael J. Peel, 2014. "Addressing unobserved endogeneity bias in accounting studies: control and sensitivity methods by variable type," Accounting and Business Research, Taylor & Francis Journals, vol. 44(5), pages 545-571, October.

    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:wp921. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dipartimento Scienze Economiche, Universita' di Bologna (email available below). General contact details of provider: https://edirc.repec.org/data/sebolit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.