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Copula Bivariate Probit Models: With An Application To Medical Expenditures

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  • Rainer Winkelmann

Abstract

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.

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  • Rainer Winkelmann, 2012. "Copula Bivariate Probit Models: With An Application To Medical Expenditures," Health Economics, John Wiley & Sons, Ltd., vol. 21(12), pages 1444-1455, December.
    • Handle: RePEc:wly:hlthec:v:21:y:2012:i:12:p:1444-1455
    DOI: 10.1002/hec.1801
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    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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