DEMAND FOR MEDICAL-CARE BY THE ELDERLY - A FINITE MIXTURE APPROACH

In this article we develop a finite mixture negative binomial count mo del that accommodates unobserved heterogeneity in an intuitive and ana lytically tractable manner. This model, the standard negative binomial model, and its hurdle extension are estimated for six measures of med ical care demand by the elderly using a sample from the 1987 National Medical Expenditure Survey. The finite mixture model is preferred over all by statistical model selection criteria. Two points of support ade quately describe the distribution of the unobserved heterogeneity, sug gesting two latent populations, the 'healthy' and the 'ill' whose fitt ed distributions differ substantially from each other. (C) 1997 by Joh n Wiley & Sons.