COPULA BIVARIATE PROBIT MODELS: WITH AN APPLICATION TO MEDICAL EXPENDITURES

Rainer Winkelmann

Health Economics, 2012, vol. 21, issue 12, 1444-1455

Abstract: The bivariate probit model is frequently used for estimating the effect of an endogenous binary regressor (the ‘treatment’) on a binary health outcome variable. This paper discusses simple modifications that maintain the probit assumption for the marginal distributions while introducing non‐normal dependence using copulas. In an application of the copula bivariate probit model to the effect of insurance status on the absence of ambulatory health care expenditure, a model based on the Frank copula outperforms the standard bivariate probit model. Copyright © 2011 John Wiley & Sons, Ltd.

Date: 2012
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https://doi.org/10.1002/hec.1801

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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:21:y:2012:i:12:p:1444-1455

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