@techreport{NBERt0228,
title = "Much Ado About Two: Reconsidering Retransformation and the Two-Part Model in Health Economics",
author = "John Mullahy",
institution = "National Bureau of Economic Research",
type = "Working Paper",
series = "Technical Working Paper Series",
number = "228",
year = "1998",
month = "March",
doi = {10.3386/t0228},
URL = "http://www.nber.org/papers/t0228",
abstract = {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.},
}