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Specification and Simulated Likelihood Estimation of a Non-normal Outcome Model with Selection: Application to Health Care Utilization

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Abstract

We develop a model specification and estimation framework that is applicable to many microeconometric models which fall into a treatment-outcome framework. We apply our methodology to examine the causal effect of man-aged care on the utilization of health care services. Specifically, we jointly model multinomial choice of insurance plans (treatment) and counts and binary choices of utilization (outcome) using a latent factor structure, enabling a distinction between selection on unobservables and observables. We apply maximum simulated likelihood techniques to estimate the parameters of our model and find that there are significant unobserved self-selection effects and that these effects substantially change the effects of insurance on utilization.

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  • Partha Deb & Pravin K. Trivedi, 2002. "Specification and Simulated Likelihood Estimation of a Non-normal Outcome Model with Selection: Application to Health Care Utilization," Economics Working Paper Archive at Hunter College 02/5, Hunter College Department of Economics, revised 2004.
    • Handle: RePEc:htr:hcecon:02/5
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    1. 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.

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