Unobserved Heterogeneity and Censoring in the Demand for Health Care

Abstract

This paper analyses the demand for private health care by Spanish households using a micro budget survey. The methodology used takes care of the three part decision process involved in this type of behaviour, namely the decision to use private health care, how often to do so and how much to spend each time and also the effects of unobserved heterogeneity. Since the theoretical framework corresponds to the Grossman model of health investment, the results also provide a test of the theory when these issues are considered. Finally, the obtained evidence also suggest that the current system of tax deductions for private health care expenditures is regressive.

JEL Classification: C23, C25, D12, I11