LIMITED DEPENDENT-VARIABLES IN WILLINGNESS-TO-PAY STUDIES - APPLICATIONS IN HEALTH-CARE

The appropriate technique for econometric analysis of WTP (willingness to pay) data is an issue which has not been addressed in many studies of WTP for health and health care. This paper argues that, whether an open-ended question or a payment scale approach is adopted, the way i n which WTP is recorded means that limited dependent variable models a re more appropriate than standard regression analysis, Data from an op en ended question on WTP for maternity care contain a large proportion of zeros and the evidence suggests that a two-part specification perf orms better than OLS or a standard Tobit model. If the payment scale m ethod is adopted, our argument suggests that grouped data regression i s an appropriate econometric technique. In practice, with data from a study in Northern Norway, the results from OLS and grouped data regres sion are broadly similar.