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
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: yò0; 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  -