IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Much Ado About Two: Reconsidering Retransformation and the Two-Part Model in Health Economics

  • John Mullahy

In health economics applications involving outcomes (y) and covariates (x), it is often the case that the central inferential problems of interest involve E[y|x] and its associated partial effects or elasticities. Many such outcomes have two fundamental statistical properties: yò0; and the outcome y=0 is observed with sufficient frequency that the zeros cannot be ignored econometrically. Common approaches to estimation in such instances include Tobit, selection, and two-part models. This paper (1) describes circumstances where the standard two-part model with homoskedastic retransformation will fail to provide consistent inferences about important policy parameters; and (2) demonstrates some alternative approaches that are likely to prove helpful in applications.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/t0228.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0228.

as
in new window

Length:
Date of creation: Mar 1998
Date of revision:
Publication status: published as Mullahy, John. "Much Ado Abut Two: Reconsidering Retransformation And The Two-Part Model In Health Econometrics," Journal of Health Economics, 1998, v17(3,Jun), 247-281.
Handle: RePEc:nbr:nberte:0228
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-26, April.
  2. Wooldridge, Jeffrey M, 1992. "Some Alternatives to the Box-Cox Regression Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 935-55, November.
  3. 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 S29-59, Supplemen.
  4. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  5. Matthew J. Eichner & Mark B. McClellan & David A. Wise, 1997. "Health Expenditure Persistence and the Feasibility of Medical Savings Accounts," NBER Chapters, in: Tax Policy and the Economy, Volume 11, pages 91-128 National Bureau of Economic Research, Inc.
  6. Manning, Willard G. & Blumberg, Linda & Moulton, Lawrence H., 1995. "The demand for alcohol: The differential response to price," Journal of Health Economics, Elsevier, vol. 14(2), pages 123-148, June.
  7. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-44, September.
  8. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, March.
  9. Mullahy, John, 1986. "Specification and testing of some modified count data models," Journal of Econometrics, Elsevier, vol. 33(3), pages 341-365, December.
  10. Hay, Joel W & Olsen, Randall J, 1984. "Let Them Eat Cake: A Note on Comparing Alternative Models of the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(3), pages 279-82, July.
  11. Winfried Pohlmeier & Volker Ulrich, 1995. "An Econometric Model of the Two-Part Decisionmaking Process in the Demand for Health Care," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 339-361.
  12. Newhouse, Joseph P. & Phelps, Charles E. & Marquis, M. Susan, 1980. "On having your cake and eating it too : Econometric problems in estimating the demand for health services," Journal of Econometrics, Elsevier, vol. 13(3), pages 365-390, August.
  13. Manning, W. G. & Duan, N. & Rogers, W. H., 1987. "Monte Carlo evidence on the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 35(1), pages 59-82, May.
  14. Hay, Joel W & Leu, Robert & Rohrer, Paul, 1987. "Ordinary Least Squares and Sample-Selection Models of Health-Care Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 499-506, October.
  15. Andrews, Donald W K, 1988. "Chi-Square Diagnostic Tests for Econometric Models: Theory," Econometrica, Econometric Society, vol. 56(6), pages 1419-53, November.
  16. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberte:0228. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.