Abstract

We develop a flexible two-equation copula model to address endogeneity of medical expenditures in a distribution regression for health. The expenditure margin uses the compound gamma distribution, a special case of the Tweedie family of distributions, to account for a spike at zero and a highly skewed continuous part. An efficient estimation algorithm offers flexible choices of copulae and link functions, including logit, probit and cloglog for the health margin. Our empirical application revisits data from the Rand Health Insurance Experiment. In the joint model, using random insurance plan assignment as instrument for spending, a $1000 increase is estimated to reduce the probability of a low post-program mental health index by 1.9 percentage points. The effect is not statistically significant. Ignoring endogeneity leads to a spurious positive effect estimate.

Publication Type:	Article
Additional Information:	This is the peer reviewed version of the following article: Marra, G., Fasiolo, M., Radice, R. & Winkelmann, R. (2023). A Flexible Copula Regression Model with Bernoulli and Tweedie Margins for Estimating the Effect of Spending on Mental Health. Health Economics, which is to be published in final form at http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1050. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Publisher Keywords:	Binary response; Copula; Health expenditures; Penalized regression spline; Rand experiment; Simultaneous estimation; Tweedie distribution
Subjects:	H Social Sciences > HB Economic Theory R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine
Departments:	Bayes Business School > Actuarial Science & Insurance

Text - Accepted Version This document is not freely accessible due to copyright restrictions. To request a copy, please use the button below. Request a copy

Export

Downloads