COPULA BIVARIATE PROBIT MODELS: WITH AN APPLICATION TO MEDICAL EXPENDITURES
Article first published online: 25 OCT 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Volume 21, Issue 12, pages 1444–1455, December 2012
How to Cite
Winkelmann, R. (2012), COPULA BIVARIATE PROBIT MODELS: WITH AN APPLICATION TO MEDICAL EXPENDITURES. Health Econ., 21: 1444–1455. doi: 10.1002/hec.1801
- Issue published online: 5 NOV 2012
- Article first published online: 25 OCT 2011
- Manuscript Accepted: 16 SEP 2011
- Manuscript Revised: 14 JUL 2011
- Manuscript Received: 21 OCT 2010
- bivariate probit;
- binary endogenous regressor;
- Frank copula;
- Clayton copula
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. Copyright © 2011 John Wiley & Sons, Ltd.