Hi,
I'm interested in modeling a two part model, which
seems to go by many names in different fields:
two-tiered and hurdle models. Essentially, I'm trying
to model medical cost expenditure, but the data
consist of many individuals who never incur an
expense. Hence, there are many zeroes in the data.
As a result, I'm separating the decision into two
parts:
1) the decision to see a doctor and 2) the amount of
the expense:
P(y>0) =X_1B_1+e_1 (1)
E(y|y>0) = log(y)|y>0= X_2B_2+e_2 (2)
where the error terms between equations (1) and (2)
are independent.
I know that this is usually estimated as a probit (eqn
1) and then OLS (eqn 2) to compute
E(y)= P(y>0)E(y|y>0). However, how do I determine the
marginal effects and the associated standard errors?
Especially, if one of the variables that I'm
interested in is in both equations. Has anyone
programmed the two part model?
Thanks,
Simone
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