Copula bivariate probit models: with an application to medical expenditures.
The bivariate probit model is frequently used for estimating the effect of an endogenous binary regressor (the 'treatment') on a binary health outcome variable. This paper discusses simple modifications 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.
University of Zurich, Department of Economics, CH-8032 Zurich, Switzerland. rainer.winkelmann@econ.uzh.ch
Rainer
R
Winkelmann
D005102:Health Expenditures; D006801:Humans; D018803:Models, Economic; D009010:Monte Carlo Method; D016896:Treatment Outcome