Choosing Between the Sample-Selection Model and the Multi-Part Model
- 1 July 1984
- journal article
- research article
- Published by Taylor & Francis Ltd in Journal of Business & Economic Statistics
- Vol. 2 (3), 283-289
- https://doi.org/10.1080/07350015.1984.10509396
Abstract
Hay and Olsen (1984) incorrectly argue that a multi-part model, the two-part model used in Duan et al. (1982,1983), is nested within the sample-selection model. Their proof relies on an unmentioned restrictive assumption that cannot be satisfied. We provide a counterexample to show that the propensity to use medical care and the level of expense can be positively associated in the two-part model, contrary to their assertion. The conditional specification in the multi-part model is preferable to the unconditional specification in the selection model for modeling actual (v. potential) outcomes. The selection model also has poor statistical and numerical properties and relies on untestable assumptions. Empirically the multi-part estimators perform as well as or better than the sample selection estimator for the data set analyzed in Duan et al. (1982, 1983).Keywords
This publication has 7 references indexed in Scilit:
- Let Them Eat Cake: A Note on Comparing Alternative Models of the Demand for Medical CareJournal of Business & Economic Statistics, 1984
- Smearing Estimate: A Nonparametric Retransformation MethodJournal of the American Statistical Association, 1983
- A Comparison of Alternative Models for the Demand for Medical CareJournal of Business & Economic Statistics, 1983
- Some Interim Results from a Controlled Trial of Cost Sharing in Health InsuranceThe New England Journal of Medicine, 1981
- The demand for deductibles in private health insurance: A probit model with sample selectionJournal of Econometrics, 1981
- On the appropriateness of endogenous switchingJournal of Econometrics, 1981
- Sample Selection Bias as a Specification ErrorEconometrica, 1979