TY - JOUR
AU - Mullahy,John
TI - Much Ado About Two: Reconsidering Retransformation and the Two-Part Model in Health Economics
JF - National Bureau of Economic Research Technical Working Paper Series
VL - No. 228
PY - 1998
Y2 - March 1998
DO - 10.3386/t0228
UR - http://www.nber.org/papers/t0228
L1 - http://www.nber.org/papers/t0228.pdf
N1 - Author contact info:
John Mullahy
University of Wisconsin-Madison
Dept. of Population Health Sciences
787 WARF, 610 N. Walnut Street
Madison, WI 53726
Tel: 608/265-5410
Fax: 608/263-2820
E-Mail: jmullahy@facstaff.wisc.edu
AB - 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.
ER -