Using Trivariate Copulas to Model Sample Selection and Treatment Effects: Application to Family Health Care Demand∗

Simultaneous nonlinear econometric models with discrete outcomes are often difficult to implement. This paper considers the use of the copula approach for a model with three jointly determined outcomes. It also deals with the discrete case in which outcomes include a mixture of dichotomous choices and discrete count data. We apply this technique to study self-selection and interdependence between health insurance and health care demand among married couples. The full model consists of a dichotomous choice equation for family insurance, and a separate negative binomial equation for each spouse’s health care use.