Bayesian analysis of a self-selection model with multiple outcomes using simulation-based estimation: an application to the demand for healthcare

This paper studies a self-selection model with discrete and continuous outcomes and a treatment variable. The treatment variable is endogenous to the two outcome variables. The approach of the paper is fully parametric and Bayesian. The Bayes factor is calculated with the Savage–Dickey density ratio and used for model selection. The model is applied to two different micro data sets, the 1987–1988 National Medical Expenditure Survey and the 1996 Medical Expenditure Panel Survey. The paper studies the effect of managed care and fee-for-service type of private insurance on the demand for healthcare. It also compares the effects of private insurance and Medicaid in covering health care expenses of elderly Americans.