Latent class versus two-part models in the demand for physician services across the European Union

Using three waves of data from the European Community Household Panel, this paper estimates demand for physician services equations for 12 European countries. We focus on the selection of the most appropriate econometric specification for visits to general practitioners and to specialists among two-part and latent class models. The distinction between the demand of services from these two types of physicians allows us to distinguish cases in which two-part perform better than latent class models, evidence which is different from previous findings in the literature. The results suggest that latent class models are more appropriate than two-part models to estimate general practitioners utilisation while the opposite is found for visits to the specialists. Copyright © 2002 John Wiley & Sons, Ltd.