Dynamic Cost-offsets of Prescription Drug Expenditures: Panel Data Analysis Using a Copula-based Hurdle Model

Partha Deb, Pravin Trivedi and David Zimmer

No 15191, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents a new multivariate copula-based modeling approach for analyzing cost-offsets between drug and nondrug expenditures. Estimates are based on panel data from the Medical Expenditure Panel Survey (MEPS) with quarterly measures of medical expenditures. The approach allows for nonlinear dynamic dependence between drug and nondrug expenditures as well as asymmetric contemporaneous dependence. The specification uses the standard hurdle model with two significant extensions. First, it is adapted to the bivariate case. Second, because the cost-offset hypothesis is inherently dynamic, the bivariate hurdle framework is extended to accommodate dynamic relationships between drug and nondrug spending. The econometric analysis is implemented for six different groups defined by specific health conditions. There is evidence of modest cost-offsets of expenditures on prescribed drugs.

JEL-codes: C3 C33 C35 I11 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-ecm and nep-hea
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Published as Health Economics Volume 23, Issue 10, pages 1242–1259, October 2014

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