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Specification and simulated likelihood estimation of a non-normal treatment-outcome model with selection: Application to health care utilization

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  • Partha Deb
  • Pravin K. Trivedi

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. Copyright Royal Economic Society 2006

Suggested Citation

  • Partha Deb & Pravin K. Trivedi, 2006. "Specification and simulated likelihood estimation of a non-normal treatment-outcome model with selection: Application to health care utilization," Econometrics Journal, Royal Economic Society, vol. 9(2), pages 307-331, July.
    • Handle: RePEc:ect:emjrnl:v:9:y:2006:i:2:p:307-331
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