Choosing between and interpreting the Heckit and two-part models for corner solutions

This article addresses certain poor practices commonly seen in the applied health economics literature regarding the use of the Heckit and the two-part model. First, many articles invoke the Heckit to solve a supposed selection problem associated with masses of zero values in continuous variables, despite the fact that it has been shown elsewhere that no such selection problem exists when modeling observed actual, as opposed to latent potential, outcomes. Second, many applications incorrectly formulate the marginal effect tests in the Heckit and two-part model, thus undermining central conclusions. Finally, many researchers use a t-test of the inverse Mills coefficient to choose between the Heckit and two-part models despite its poor performace; we propose instead an adapted empirical mean square error test.