ECON 1238 - ECONOMETRIC TECHNIQUES - Econometrics Assignment Help

ECON 1238 - ECONOMETRIC TECHNIQUES ASSIGNMENT 18 AUGUST 2017 Important Information: • Due date: Friday 29 September, 5:00 PM • To be submitted on Blackboard o Hard copy is NOT required • You must submit one PDF file including: o Responses to the questions below o A log of your Stata output • Organise your results in tables/ graphs with clear labels. Refer to the tables/graphs in your discussion. • Assignment is worth 50% of your final mark in the course • The assignment will be marked out of 100. • A Stata data file named ‘dentist#.dta’ is assigned to each of you: Student ID Dataset Name Student ID Dataset Name s3579 634 dentist 14.dta s3586725 dentist27.dta s3042883 dentist15.dta s3576592 dentist28.dta s3677003 dentist16.dta s3310004 dentist29.dta s3664793 dentist17.dta s3532181 dentist30.dta s3525685 dentist18.dta s3446030 dentist31.dta s3485977 dentist19.dta s3385222 dentist32.dta s3346258 dentist20.dta s3616773 dentist33.dta s3618259 dentist21.dta s3639625 dentist12.dta s3628191 dentist22.dta s3637119 dentist11.dta s3578614 dentist23.dta s3596279 dentist10.dta s3597500 dentist24.dta s3427807 dentist9.dta s3630055 dentist25.dta s3643877 dentist8.dta s3473404 dentist26.dta Research Background and Objective Dental problems are ranked among the most frequently reported illness episodes in Australia. Dental services are available both privately and publicly to all Australians. Access to public services is subject to a considerable waiting period and strict eligibility criteria. On the other hand, access to private dental services is available to all, but effectively restricted to citizens who have private dental insurance or can afford to pay the full out-of-pocket cost of treatment. Australian policymakers recognise the importance of dental care and would like to redesign health-care policies to ease the pressure on the public sector. For this, it is important that they understand the relationship between private dental insurance and the utilisation of dental care. Your Assignment In this assignment, you are asked to conduct an analysis on factors affecting Australians’use of dental services, using a sample of individuals from a recent oral health survey. The file dentist#.dta contains data on visits to the dentist and individuals’ (dental) insurance status. In particular, the visitfreq variable takes values 0 to 3: 0 for those who do not visit a dentist, 1 for those who visit a dentist once a year, 2 for those who visit a dentist twice a year and 3 for those who visit a dentist at least 3 times in a year. The dataset also contains information on individuals’ age, gender, education status, self-reported oral health status, and health behaviours, such as the frequency of flossing, that are all important determinants of dental service utilisation. The variable names are self-explanatory. A few related references from the broad health service utilisation literature are listed below, although you can independently source out further literature. You are allowed to undertake the econometric work in small groups, although each one of you will have a different sample. However, it is important that your write-ups are significantly differentiated otherwise you run the risk of plagiarism. The list at the end of the assignment shows the data allocated to each of you. Questions (a) Specify a latent model for an individual’s decision to visit a dentist. Construct any variable(s) that you need to estimate this decision using a Probit Model. (12 marks) (b) Before estimating the econometric model, conduct a preliminary analysis on the raw data using descriptive statistics and cross-tabulations. Discuss briefly what you have learnt from this analysis. (10 marks) (c) Estimate the model. Present coefficients, average marginal effects and other results useful for your analysis. Discuss these results and any policy implications. (15 marks) (d) Discuss how well the model fits the data overall. (5 marks) (e) Estimate the decision to see a dentist using a Logit Model. Which is your preferred model, the Probit or the Logit, and why? Briefly comment on the difference. (6 marks) (f) It is very likely that the insurance variable is endogenous. In the context of this analysis, discuss what could possibility drive this endogeneity. (6 marks) (g) We can use an instrumental variables approach to address the endogenity discussed in (f). Two variables have been identified as potential instruments for insurance – its price (insu_price) and the smoking status of individuals (smoker). The price of insurance is derived using information from another source. It is an age and gender-specific price per dollar of expected benefits received. Discuss whether you think these are good instruments. (6 marks) (h) Use the two-stage least squares method (assuming a linear regression model) to address this endogeneity. Compare the size and significance of the effect of insurance on dentist visit, with those you estimated in (c) where you assumed insurance status to be exogenous. [HINT: parameters need to be re-scaled for comparison.] (12 marks) (i) Estimate an Ordered Probit Model for the decision to see a dentist (assuming insurance status to be exogenous). Briefly comment on the sign and significance of the estimated parameters. (6 marks) (j) Obtain the average marginal effects and average predicted probability for the third outcome (visitfreq=3). Discuss the marginal effects of age and self-assessed dental health. (12 marks) (k) Health funds usually offer three types of insurance that individuals can choose from – hospital only, ancillary only, or a combined cover of hospital and ancillary– where ancillary (or extras) cover provides benefits for ancillary services such as physiotherapy, dental and optical treatment. Suppose you have this information in your dataset. Discuss possible modelling strategy(ies) for the decision to purchase insurance. (5 marks) (l) Discuss any caveats/issues that may have limited/affected your analysis. (5 marks) References Srivastava P., G. Chan & A. Harris (2015), “Oral health, dental insurance and dental service use in Australia”, Health Economics, forthcoming, http://onlinelibrary.wiley.com/doi/10.1002/hec.3272/epdf>. Hopkins, S., M. P. Kidd, and A. Ulker (2013). “Private health insurance status and utilisation of dental services in Australia.” Economic Record, 89 (285), 194-206. Harmon, C. and B. Nolan (2001). “Health insurance and health services utilization in Ireland.” Health Economics, 10 (2), 135-145. Mueller, C. and A. Monheit (1988). “Insurance coverage and the demand for dental care: Results for non-aged white adults.” Journal of Health Economics, 7 (1), 59-72. Vera-Hernandez, A. M. (1999). “Duplicate coverage and demand for health care. The case of Catalonia.” Health Economics, 8 (7), 579-598.