Let Them Eat Cake: A Note on Comparing Alternative Models of the Demand for Medical Care

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Abstract
This article comments on the Rand econometric approach to estimating and testing models of the demand for medical care as typified in Duan et al. (1983). The Rand methodology is contrasted with more mainstream econometric approaches to similar empirical problems as developed in the sample selection literature. It is shown that despite Rand's claim, their approach requires some fairly unusual assumptions on the model joint error distribution and functional form. Alternatively, their model likelihood functions may be interpreted as being nested in more general sample selection model likelihood functions with easily testable parameter restrictions.