dataset contains a balanced panel of German individuals and their health care use

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Use the dataset healthcare_b.dta, available from the module Canvas site. The dataset contains a balanced panel of German individuals and their health care use. The dataset has the following variables

 

ID = person - identification number

FEMALE = female = 1; male = 0

YEAR = calendar year of the observation

AGE = age in years

AGESQ = age squared.

HSAT = health satisfaction, coded 0 (low) - 10 (high) HANDDUM = handicapped = 1; otherwise = 0 HANDPER = degree of handicap in percent (0 - 100)

HHNINC = household nominal monthly net income in German marks / 10000

HHKIDS = children under age 16 in the household = 1; otherwise = 0

EDUC = years of schooling

MARRIED = married = 1; otherwise = 0 WORKING = employed = 1; otherwise = 0 BLUEC = blue collar employee = 1; otherwise = 0

WHITEC = white collar employee = 1; otherwise = 0

SELF = self employed = 1; otherwise = 0

BEAMT = civil servant = 1; otherwise = 0

DOCVIS = number of doctor visits in last three months HOSPVIS = number of hospital visits in last calendar year DOCTOR = dummy variable = 1 if DOCVIS > 0, 0 otherwise. HOSPITAL = dummy variable = 1 if HOSPVIS > 0, 0 otherwise. PUBLIC = insured in public health insurance = 1; otherwise = 0 ADDON = insured by add-on insurance = 1; otherwise = 0

 

 

a) Use the dataset to assess how much visits to the doctor over the last three months is affected by having children under 16 in the household (variable HHKIDS). Estimate a simple model using DOCVIS as the dependent variable and apply individual fixed effects. Include the following as controls: AGE, AGESQ, MARRIED, WORKING, LINC and ADDON. Generate LINC by taking a natural logarithm of HHNINC. Interpret your results for HHKIDS and LINC. [Notes: Some people visit the doctor a lot, but do not remove outliers. For fixed effects estimation, use either ‘areg’ or ‘xtreg’ command] [40 marks]

 

b) Estimate the same model as in a), but use pooled OLS instead of individual fixed effects. Interpret the estimated coefficient for HHKIDS and LINC in this model. [20 marks]

 

c) Give an explanation why the results differ or don’t differ between OLS and fixed effects, and state which one should be preferred, and why. [40 marks]

 

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