Copula Bivariate Probit Models: With an Application to Medical Expenditures

30 Pages Posted: 29 Oct 2011

See all articles by Rainer Winkelmann

Rainer Winkelmann

University of Zurich - Statistics and Empirical Economic Research; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: July 1, 2011

Abstract

The bivariate probit model is frequently used for estimating the eff ect of an endogenous binary regressor (the "treatment") on a binary health outcome variable. This paper discusses simple modifi cations 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.

Keywords: Bivariate probit, binary endogenous regressor, Frank copula, Clayton copula

JEL Classification: C35, I12

Suggested Citation

Winkelmann, Rainer, Copula Bivariate Probit Models: With an Application to Medical Expenditures (July 1, 2011). Available at SSRN: https://ssrn.com/abstract=1949781 or http://dx.doi.org/10.2139/ssrn.1949781

Rainer Winkelmann (Contact Author)

University of Zurich - Statistics and Empirical Economic Research ( email )

Raemistrasse 62
CH-8001 Zurich
Switzerland
++41 1 634 2292 (Phone)
++41 1 634 4996 (Fax)

HOME PAGE: http://www.unizh.ch/sts/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 503 (Phone)
+49 228 3894 510 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
108
Abstract Views
991
rank
302,935
PlumX Metrics