Working Paper: NBER ID: w15191
Authors: Partha Deb; Pravin K. Trivedi; David M. Zimmer
Abstract: 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.
Keywords: cost offsets; prescription drugs; nondrug expenditures; copula-based model; panel data
JEL Codes: C3; C33; C35; I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lagged drug spending (H51) | current nondrug spending (H51) |
| lagged logged drug spending (H51) | current nondrug spending (H51) |
| current drug spending (H51) | current medical spending (H51) |