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Copula bivariate probit models: with an application to medical expenditures


Winkelmann, Rainer (2011). Copula bivariate probit models: with an application to medical expenditures. Working paper series / Department of Economics No. 29, University of Zurich.

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.

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.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C35, I12
Language:English
Date:September 2011
Deposited On:25 Nov 2011 10:13
Last Modified:12 Aug 2017 12:32
Series Name:Working paper series / Department of Economics
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/wp.html

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