Specification and simulated likelihood estimation of a non-normal treatment-outcome model with selection: Application to health care utilization
Partha Deb () and
Pravin Trivedi ()
Econometrics Journal, 2006, vol. 9, issue 2, 307-331
We develop a specification and estimation framework for a class of nonlinear, non-normal microeconometric models of treatment and outcome with selection. A latent factor structure is used to accommodate selection into treatment and a simulated likelihood method is used for estimation. The methodology is applied to examine the causal effect of managed care, a multinomial discrete choice process, on the utilization of health care services, measured as binary indicators and counts. The results indicate that there are significant unobserved self-selection effects and these effects substantially change the estimated effects of insurance on utilization. Copyright Royal Economic Society 2006
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