Specification and Simulated Likelihood Estimation of a Non-Normal Treatment-Outcome Model with Selection: Application to Health Care Utilization

25 Pages Posted: 3 Jul 2006

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

Abstract

We develop a specification and estimation framework for a class of nonlinear, non-normal microeconometric models of treatment and outcome with selection. A latent factor structure is used to accommodate selection into treatment and a simulated likelihood method is used for estimation. The methodology is applied to examine the causal effect of managed care, a multinomial discrete choice process, on the utilization of health care services, measured as binary indicators and counts. The results indicate that there are significant unobserved self-selection effects and these effects substantially change the estimated effects of insurance on utilization.

Suggested Citation

Deb, Partha and Trivedi, Pravin K., Specification and Simulated Likelihood Estimation of a Non-Normal Treatment-Outcome Model with Selection: Application to Health Care Utilization. Econometrics Journal, Vol. 9, No. 2, pp. 307-331, July 2006. Available at SSRN: https://ssrn.com/abstract=913516 or http://dx.doi.org/10.1111/j.1368-423X.2006.00187.x

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

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