Models for count data with endogenous participation

We present several extensions of the Poisson and negative binomial models for count data based on the lognormal model for latent heterogeneity in the conditional means. The lognormal model provides a versatile specification that is more flexible than the familiar log gamma form, and provides a platform for several “two part” extensions that have appeared in the literature, including zero inflation, hurdle and sample selection models. We then extend these received two- part models by allowing for endogeneity of the participation equation. We conclude with a detailed application using the data employed in a recent study of the German health care system.      

Quasitransitive social preference: why some very large coalitions have very little power

Summary. If only the strict part of social preference is required to be transitive then Independence of Irrelevant Alternatives implies that there is a coalition containing all but one individual that cannot force x to be socially ranked above y for at least half of the pairs of alternatives (x,y). Received: August 29, 1996; revised version: March 24, 1997     

Using Copulas to Model Switching Regimes with an Application to Child Labour*

The copula approach to econometric modelling involves the specification of the separate components of the joint distribution of the random variables of interest: models built for each margin are bound together using a copula function. In this paper, the copula approach is used to construct models for switching regimes. The construct is illustrated by fitting a wage earnings model for child workers in the early 1900s, with regimes governed according to literacy. The results improve on earlier modelling efforts by Poirier and Tobias (2003), finding that a child worker may on average expect a reduction in earnings from being literate.     

A new approach to modeling co-movement of international equity markets: evidence of unconditional copula-based simulation of tail dependence

Analyzing equity market co-movements is important for risk diversification of an international portfolio. Copulas have several advantages compared to the linear correlation measure in modeling co-movement. This paper introduces a copula ARMA-GARCH model for analyzing the co-movement of international equity markets. The model is implemented with an ARMA-GARCH model for the marginal distributions and a copula for the joint distribution. After goodness of fit testing, we find that the Student’s t copula ARMA(1,1)-GARCH(1,1) model with fractional Gaussian noise is superior to alternative models investigated in our study where we model the simultaneous co-movement of nine international equity market indexes. This model is also suitable for capturing the long-range dependence and tail dependence observed in international equity markets. Rachev’s research was supported by grants from Division of Mathematical, Life and Physical Science, College of Letters and Science, University of California, Santa Barbara, and the Deutschen Forschungsgemeinschaft (DFG). Sun’s research was supported by grants from the Deutschen Forschungsgemeinschaft (DFG) and Chinese Government Award for Outstanding Ph.D Students Abroad 2006, No. 2006-180. Kalev’s research was supported with a NCG grant from the Faculty of Business and Economics, Monash University. Data are supplied by Securities Industry Research Center of Asia-Pacific (SIRCA) on behalf of Reuters. The constructive comments of two anonymous referees, the Associate Editor, A.S. Wirjanto, and the Editor-in-charge, Baldev Raj, are gratefully acknowledged. The reviewers and editors are not responsible for any residual errors and omissions.     

中国城镇社会医疗保障改革的理论探索

With its transition to a market-oriented economy, China has gone through significant changes in health care delivery and financing systems in the last three decades. Since 1998, a new public health insurance program for urban employees, called Basic Medical Insurance Program (BMI), has been established. One theme of this reform was to control medical service over-consumption with new cost containment methods. This paper attempts to evaluate the effects of the reformed public health insurance on health care utilization, with in-depth theoretical investigation. We formulate a health care demand model based on the structure of health care delivery and health insurance systems in China. It is assumed in the model that physicians have pure monopoly power in determining patients’ health care utilization. The major inference is that the insurance co-payment mechanism cannot reduce medical service over-utilization effectively without any efforts to control physicians’ behavior. Meanwhile, we use the calibrated simulation to demonstrate our hypothesis in the theoretical model. The main implication is that physicians’ incentive to over utilize medical services for their own benefits is significant and severe in China.      

COHERENCY AND COMPLETENESS OF STRUCTURAL MODELS CONTAINING A DUMMY ENDOGENOUS VARIABLE*

Let y be a vector of endogenous variables and let w be a vector of covariates, parameters, and errors or unobservables that together are assumed to determine y. A structural model y=H(y, w) is complete and coherent if it has a well‐defined reduced form, meaning that for any value of w there exists a unique value for y. Coherence and completeness simplifies identification and is required for many estimators and many model applications. Incoherency or incompleteness can arise in models with multiple decision makers, such as games, or when the decision making of individuals is either incorrectly or incompletely specified. This article provides necessary and sufficient conditions for the coherence and completeness of simultaneous equation systems where one equation is a binomial response. Examples are dummy endogenous regressor models, regime switching regressions, treatment response models, sample selection models, endogenous choice systems, and determining if a pair of binary choices are substitutes or complements.     

An econometric analysis of veterans’ health care utilization using two-part models

Based on the 1992 US National Survey of Veterans, we analyzed veterans inpatient and outpatient health care utilization patterns by estimating count data two-part hurdle models. We also identified factors that affect veterans choice of health care between VA and non-VA facilities using count data selection models. Not surprisingly, we found that health condition measures are the most important factors in determining veterans health care utilization. Gender, disability, and employment status are also significant. Veterans with lower socio-economic status, without other health insurance coverages, or living near VA health care facilities are more likely to use VA health care system for outpatient visits and inpatient admissions. Our study underscores the role of alternative sources of health care and insurance in discerning the true effects of the explanatory variables on an individuals total demand for health care and its allocation between alternative providers.Jel classification: C35, I12, H51This research was done under a contract with the VA Health Care Network, Upstate New York (VISN 2). We are grateful to A. Colin Cameron, Diane Dewer, Joe Engelhardt, Terrance Kinal, Hamp Lankford, Frank Windmeijer, and two anonymous referees for helpful suggestions and comments. We alone are responsible for the views expressed, and deficiencies remaining, in the paper.First version received: September 2001/Final version received: February 2003     

Dissertation abstract: “Essays in applied economics on the intervention of a third player in agency relationships”

Agency theory has established that appropriate incentives can reconcile the diverging interests of the principal and the agent. Focusing on three applications, this dissertation evaluates the empirical relevance of these results when a third party interacts with the primary contract. The analyses provided rely on either laboratory or natural experiments. First, corruption is analyzed as a two-contract situation: a delegation contract between a Principal and an Agent and a corruption pact concluded between this Agent and a third player, called Briber. A survey of the recent microeconomic literature on corruption first highlights how corruption behavior results from the properties of those two agreements. We thereafter show that the Agent faces a conflict in reciprocities due to those two conflicting agreements. The resulting delegation effect, supported by observed behavior in our three-player experimental game, could account for the deterrence effect of wages on corruption. Second, health care is governed by contradictory objectives: patients are mainly concerned with the health provided, whereas containing health care costs is the primary goal of health care administrators. We provide further insights into the ability of incentives to balance these two competing objectives. In this matter, our theoretical and econometric analysis evaluates how a new mixed compensation scheme, introduced in Quebec in 1999 as an alternative to fee-for-services, has affected physicians’ practice patterns. Free switching is shown to be an essential feature of the reform, since it implements screening between physicians. Finally, the demand for underground work departs from the traditional Beckerian approach to illegal behavior, due to the dependence of benefits from illegality on competitors’ behavior. We set up a theoretical model in which the demand for underground work from all producers competing on the same output market is analyzed simultaneously. We first show that competition drastically undermines the individual benefits of tax evasion. At equilibrium, each firm nonetheless chooses evasion with a positive probability, strictly lower than one. This Bertrand curse could then account for the “tax evasion puzzle” i.e. the overprediction of evasion in models that ignore market interactions. We thereafter show that allowing firms to denounce competitors’ evasion is not likely to solve this curse—by providing a credible threat against price cuts, it fosters illegal work. Empirical evidence from a laboratory experiment confirms these predictions. Without denunciation, experimental firms often choose evasion whereas evasion benefits are canceled out by competition. When introduced, denunciation is rarely used by firms, but the threat makes evasion profitable. JEL Classification K42, I18, D21, C25, C91     

Examining the association between pain severity and quality-of-life,work-productivity loss,and healthcare resource use among European adults diagnosed with pain

Objective: The goal of this research was to quantify the association between pain severity and several health outcomes in a large sample of patients diagnosed with some form of pain.

Methods: Responses from patients who had been diagnosed with some form of pain (n?=?14,459) were drawn from the 2013 EU National Health and Wellness Survey (NHWS; n?=?62,000). Respondents reported their subjective pain severity in the past week on a numerical rating scale (0–10) as well as the Medical Outcomes Study Short Form (SF-36), Work Productivity and Activity Impairment Questionnaire (WPAI), and healthcare resource utilization in the past 6 months (healthcare professional (HCP) visits, emergency room (ER) visits, and hospitalizations). Associations between pain severity and health outcomes were examined via a series of regression models controlling for a set of demographic and health-related covariates.

Results: After controlling for demographics and comorbidities, pain severity in the past week was shown to be significantly negatively associated with Health Utilities (b = ?0.022, p?b?=?0.18, p?b?=?0.13, p?b?=?0.14, p?b?=?0.08, p?Limitations: This study was a self-report cross-sectional study which may have biased the results and does not allow for causal inferences to be made. Finally, the regression models run were limited to available covariates and, hence, some potentially important covariates may not have been included in these models.

Conclusions: The findings suggest that reducing pain severity could result in an increase in patients’ quality-of-life and work productivity, and a decrease in healthcare resource use. The equations, linking pain and outcomes, were presented in an accessible format so they could be readily applied in healthcare decision-making.     

Initial offers and outcomes in wage bargaining: who wins?

The initial works council’s wage claim, and the initial firm’s (counter)offer, as well as the fraction of the disputed wages the works council is able to capture conditional on initial disagreement, are analyzed using Spanish data on wage settlements. After a given initial wage claim, the rules of the system force the firm either to accept it or to make a counteroffer prior to a fixed and short deadline. In this context, signaling models predict that the wage claim should try to screen the firm’s level of profitability, while the (most likely forced) offer is expected to reveal little information. Both hypotheses are tested and neither one is rejected. The analysis of the fraction of the disputed wages the workers get after initial disagreement, as well as the length of the negotiation period, provide further evidence in favor of signaling models, since we find they are related to both observed and private information. Moreover, conditional on covariates, for a number of sectors, we cannot reject that the parties “split the difference” between both initial offers. This solution coincides with Rubinstein’s (Econometrica 50:97–109, 1982) wage, the solution for the complete information game.     

Measuring Beliefs in an Experimental Lost Wallet Game

We measure beliefs in an experimental game. Player 1 may take x < 20 Dutch guilders, or leave it and let player 2 split 20 guilders between the players. We find that the higher is x (our treatment variable), the more likely is player 1 to take the x. Out of those who leave the x, many expect to get back less than x. There is no positive correlation between x and the amount y that 2 allocates to 1. However, there is positive correlation between y and 2's expectation of 1's expectation of y. Journal of Economic Literature Classification Numbers: C72, C92.     

Conditional correlations in the returns on oil companies stock prices and their determinants

The identification of the forces that drive stock returns and the dynamics of their associated volatilities is a major concern in empirical economics and finance. This analysis is extremely important for determining optimal hedging strategies. This paper investigates the stock prices’ returns and their financial risk factors for several integrated oil companies, namely Bp (BP), Chevron-Texaco (CVX), Eni (ENI), Exxon-Mobil (XOM), Royal Dutch (RD) and Total-Fina Elf (TFE). We measure the actual co-risk in stock returns and their determinants “within” and “between” the different oil companies, using multivariate cointegration techniques in modelling the conditional mean, as well as multivariate GARCH models for the conditional variances. The distinguishing features of this paper are: (i) focus on the determinants of the market value of each company using the cointegrated VAR/VECM methodology; (ii) specification of the conditional variances of VECM residuals with the Constant Conditional Correlation (CCC) multivariate GARCH model of Bollerslev [(1990) Review of Economics and Statistics 72:498–505] and the Dynamic Conditional Correlation (DCC) multivariate GARCH model of Engle [(2002) Journal of Business and Economic Statistics 20:339–350]; (iii) discussion of the performance of optimal hedge ratios calculated with the DCC estimates. The “within” and “between” DCC indicate time-varying interdependence between stock return volatilities and their determinants. Moreover, DCC models are shown to produce more accurate hedging strategies.     

Healthcare costs associated with nephrology care in pre-dialysis chronic kidney disease patients

Abstract

Objective:

To compare the healthcare costs of pre-dialysis chronic kidney disease (CKD) patients cared for in a nephrology clinic setting versus other care settings.

Methods:

An analysis of health claims between 01/2002 and 09/2007 from the Ingenix Impact Database was conducted. Inclusion criteria were ≥18 years of age, ≥1 ICD-9 claim for CKD, and ≥1 estimated glomerular filtration rate (eGFR) value of <60?mL/min/1.73?m². Patients were classified in the nephrology care cohort if they were treated in a nephrology clinic setting at least once during the study period. Univariate and multivariate analyses were conducted to compare average annualized healthcare costs of patients in nephrology care versus other care settings.

Results:

Among the 20,135 patients identified for analysis, 1,547 patients were cared for in a nephrology clinic setting. Nephrology care was associated with lower healthcare costs with an unadjusted cost savings of $3,049 ($11,303 vs. $14,352, p?=?0.0014) and a cost ratio of 0.8:1 relative to other care settings. After adjusting for covariates, nephrology care remained associated with lower costs (adjusted cost savings: $2,742, p?=?0.006).

Limitations:

Key limitations included potential inaccuracies of claims data, the lack of control for patients’ ethnicity in the calculation of eGFR values, and the presence of potential biases due to the observational design of the study.

Conclusions:

The current study demonstrated that pre-dialysis CKD patients treated in nephrology clinics were associated with significantly lower healthcare costs compared with patients treated in other healthcare settings.     

What Have We Learned about the Employment Effects of Severance Pay? Further Iterations of Lazear Et al.

In this study we examine the effect of severance pay on employment and unemployment, using data on industrialized OECD countries. Our starting point is Lazear’s [(1990) Quarterly Journal of Economics 105, 699–726] dictum that severance payment requirements unfavorably impact the labor market. We extend his sample period and add to his parsimonious specification a variety of fixed and time-varying labor market institutions. While the positive effect of severance pay on unemployment garners some support, there is no real indication of adverse effects in respect of the other employment outcomes identified here, namely, the employment-population ratio, the labor force participation rate, and long-term unemployment. Moreover, with the possible exception of collective bargaining coordination, the role of institutions is also more muted than suggested in the literature. We thank, without implicating, an anonymous referee for most helpful comments on the first draft of this paper.     

Paying the expected externality for a price quote achieves bargaining efficiency

A seller and buyer have reservation prices x and y. Each has a subjective distribution on the other's reservation price. Paying an offer or the expected benefit the other participant receives from his offer induces honest price quotations, hence efficiency: sale iff y> x.     

Complementarity and the Measurement of Individual Risk Tradeoffs: Accounting for Quantity and Quality of Life Effects

This paper considers the factors responsible for differences with age in estimates of the wage compensation an individual requires to accept increased occupational fatality risk. We derive a relationship between the value of a statistical life (VSL) and the degree of complementarity between consumption and labor supplied when health status serves as a potential source of variation in this relationship. Our empirical analysis finds that variations in an individual’s health status or quality of life and anticipated longevity threats lead to significant differences in the estimated wage/risk tradeoffs. We describe how extensions to the specification of hedonic wage models, including measures for quality of life and anticipated longevity threats, help to explain the diversity in past studies examining how the estimated wage–risk tradeoff changes with age.      

A MARKET WITH A SOCIAL CONSUMPTION EXTERNALITY*

We model a spatial market in which the utility of each consumer is affected by the consumers who buy precisely the same product. The marginal contribution of consumers x's purchase on consumer y depends on |x–y|, which declines as |x–y| increases. Such modelling of preferences fits goods that signal a consumer's place in society—clothing styles, automobiles and jewellry are examples. For 2n + 1 firms we find the unique symmetric equilibrium and derive comparative statics on the optimal number of firms, the largest number of firms the market can support, and the behaviour of profits per firm as n increases.     

Examining the association of smoking with work productivity and associated costs in Japan

Aims: Smoking is associated with significant health and economic burden globally, including an increased risk of many leading causes of mortality and significant impairments in work productivity. This burden is attenuated by successful tobacco cessation, including reduced risk of disease and improved productivity. The current study aimed to show the benefits of smoking cessation for workplace productivity and decreased costs associated with loss of work impairment.

Materials and methods: The data source was the 2011 Japan National Health and Wellness Survey (n?=?30,000). Respondents aged 20–64 were used in the analyses (n?=?23,738) and were categorized into: current smokers, former smokers, and never smokers. Generalized linear models controlling for demographics and health characteristics examined the relationship of smoking status with the Work Productivity and Activity Impairment questionnaire (WPAI-GH) endpoints, as well as estimated indirect costs.

Results: Current smokers reported the greatest overall work impairment, including absenteeism (i.e. work time missed) and presenteeism (i.e. impairment while at work); however, after controlling for covariates, there were no significant differences between former smokers and never smokers on overall work impairment. Current smokers and former smokers had greater activity impairment (i.e. impairment in daily activities) than never smokers. Current smokers reported the highest indirect costs (i.e. costs associated with work impairment); however, after controlling for covariates, there were no significant differences between former smokers and never smokers on indirect costs.

Limitations and conclusions: Smoking exerts a large health and economic burden; however, smoking cessation attenuates this burden. The current study provides important further evidence of this association, with former smokers appearing statistically indistinguishable from never smokers in terms of work productivity loss and associated indirect costs among a large representative sample of Japanese workers. This report highlights the workplace benefits of smoking cessation across productivity markers and cost-savings.     

Ambiguity attitude, R&D investments and economic growth

The process aimed at discovering new ideas is an economic activity the returns from which are intrinsically uncertain. We extend the neo-Schumpeterian growth framework to investigate the role of strong uncertainty in the innovative process. In particular, we postulate that, when deciding upon R&D efforts, investors hold ‘ambiguous beliefs’ about the exact probability of arrival of the next vertical innovation, and that they face ambiguity via the α −MEU decision rule (Ghirardato et al., J Econ Theory 118:133–173, 2004). Along the balanced growth path, the higher the agent’s ambiguity aversion (α), the lower the R&D efforts and the economic performance. Consistent with cross-country empirical evidence, this causal mechanism suggests that, together with the profitability conditions of the economy, different ‘cultural’ attitudes towards ambiguity may help explain the different R&D efforts observed across countries.