NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Much Ado About Two: Reconsidering Retransformation and the Two-Part Model in Health Economics

John Mullahy

NBER Technical Working Paper No. 228
Issued in March 1998

In health economics applications involving outcomes (y) and covariates (x), it is often the case that the central inferential problems of interest involve E[y|x] and its associated partial effects or elasticities. Many such outcomes have two fundamental statistical properties: yĆ²0; and the outcome y=0 is observed with sufficient frequency that the zeros cannot be ignored econometrically. Common approaches to estimation in such instances include Tobit, selection, and two-part models. This paper (1) describes circumstances where the standard two-part model with homoskedastic retransformation will fail to provide consistent inferences about important policy parameters; and (2) demonstrates some alternative approaches that are likely to prove helpful in applications.

download in pdf format
   (1950 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/t0228

Published: Mullahy, John. "Much Ado Abut Two: Reconsidering Retransformation And The Two-Part Model In Health Econometrics," Journal of Health Economics, 1998, v17(3,Jun), 247-281.

Users who downloaded this paper also downloaded* these:
Manning and Mullahy t0246 Estimating Log Models: To Transform or Not to Transform?
Manning, Basu, and Mullahy t0293 Generalized Modeling Approaches to Risk Adjustment of Skewed Outcomes Data
West and McCracken t0226 Regression-Based Tests of Predictive Ability
Berry, Levinsohn, and Pakes w6481 Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market
Gustafson and Levine w6489 Less-Skilled Workers, Welfare Reform, and the Unemployment Insurance System
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us