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

43 Pages Posted: 4 Aug 2009 Last revised: 6 Jul 2010

See all articles by Partha Deb

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics

Pravin K. Trivedi

Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics

David M. Zimmer

Western Kentucky University - Department of Economics

Date Written: July 2009

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.

Suggested Citation

Deb, Partha and Trivedi, Pravin K. and Zimmer, David M., Dynamic Cost-Offsets of Prescription Drug Expenditures: Panel Data Analysis Using a Copula-Based Hurdle Model (July 2009). NBER Working Paper No. w15191. Available at SSRN: https://ssrn.com/abstract=1442656

Partha Deb (Contact Author)

City University of New York, CUNY Hunter College - Department of Economics ( email )

695 Park Avenue
New York, NY 10021
United States

Pravin K. Trivedi

Indiana University Purdue University Indianapolis (IUPUI) - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-2100
United States

David M. Zimmer

Western Kentucky University - Department of Economics ( email )

Grise Hall, Room 426
1906 College Heights Blve.
Bowling Green, KY 42101
United States

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