Dynamic Cost-offsets of Prescription Drug Expenditures: Panel Data Analysis Using a Copula-based Hurdle Model

Partha Deb, Pravin K. Trivedi, David M. Zimmer

NBER Working Paper No. 15191
Issued in July 2009
NBER Program(s):   HE

This paper presents a new multivariate copula-based modeling approach for analyzing cost-offsets between drug and nondrug expenditures. Estimates are based on panel data from the Medical Expenditure Panel Survey (MEPS) with quarterly measures of medical expenditures. The approach allows for nonlinear dynamic dependence between drug and nondrug expenditures as well as asymmetric contemporaneous dependence. The specification uses the standard hurdle model with two significant extensions. First, it is adapted to the bivariate case. Second, because the cost-offset hypothesis is inherently dynamic, the bivariate hurdle framework is extended to accommodate dynamic relationships between drug and nondrug spending. The econometric analysis is implemented for six different groups defined by specific health conditions. There is evidence of modest cost-offsets of expenditures on prescribed drugs.

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Document Object Identifier (DOI): 10.3386/w15191

Forthcoming in Health Economics - "Cost-Offsets of Prescription Drug Expenditures: Data Analysis Via a Copula-Based Bivariate Dynamic Hurdle Model " Partha Deb, Pravin K. Trivedi, and David M. Zimmer. Article first published online: 18 AUG 2013 DOI: 10.1002/hec.2982

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