Discrete Choice Estimation of Price-Elasticities: The Benefits of a Flexible Behavorial Model of Health Care Demand

by William Dow

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Previous literature on discrete health care demand estimation has used a wide range of different specifications, and results may be sensitive to model choice, This paper advocates a flexible behavioral model of discrete choice health care demand which nests previous models, enabling them to be structurally intrepreted as well as tested against one another. Based on testing of data from Cote d'Ivoire, it is found that certain recognized restrictions on income variable s appear to have little impact on results. However, the specifications of the price variable can have large impacts on policy inferences. The flexible model ameliorates this sensitivity, and allows structural interpretation when the data rejects more restrictive models.

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