17
The identifying assumption is that the model should be additive separable at the log
level.
19
Before turning to the analysis, we first provide an informal test for the identifying
assumption of parallel trends in health – in the absence of the Defense Bill – for the
military personnel and other government employees at 56-70 years of age.
Unfortunately due to data restrictions we cannot study the evolvement of health at
56-70 years of age before the 1992 Defense bill. The first cohort that we observe in our
data is those born in 1931. We have data on inpatient care from 1987. The implication is
that we have data on inpatient care from the age of 56 for the 1931 cohort. We have
basically two unaffected cohorts, those born 1931 and 1932 (the Bill was taken in
February 1992, which means that the birth cohort 1933 may also have been affected) for
which we can measure health using inpatient care data at ages 56-60 in the years 1991
and 1992.
We have however, the possibility to study the evolvement of days in inpatient care
for individuals in the age span 50-54 years of age from 1987 and onwards. Under the
assumption that the health in the age groups 50-54 is proportional and constant over the
study period to the health in age span 56-70 for both groups of civil servants, a graph of
days in inpatient care at ages 50-54 for the two groups over the study period will
provide an informal test of the identifying assumption. The advantage with such an
informal test, in contrast to a more traditional difference-in-difference before reform
test, is that we can study the evolvement for the two groups (1) in the pre reform period
for the same cohorts as being used in the estimation and (2) under the study period,
however for other cohorts. The drawback is that we do not study the trends of same
outcome as in the main analysis. This requires an assumption of a constant relationship
of the health status over the study period between ages 50-54 and 56-70 in order for the
informal test to be valid.
In order to provide an understanding for the informal test we show the (predicted)
log average number of days in inpatient care at ages 56-60 in the period 1987 to 1999 in
From this figure one can see a decreasing trend for both groups. One can
potentially also see that the trends for the two groups are similar and that the level of
inpatient care is the same or higher for the military personnel before 1994 and lower
19
We have also, as a robustness test, estimated linear regression models; the results are not sensitive to the model
specification.
