This paper develops an extension of the class of finite mixture models for longitudinal count data to the bivariate case by using a hidden Markov chain approach. The model allows for disentangling unobservable time-varying heterogeneity from the dynamic effect of utilisation of primary and secondary care and measuring their potential substitution effect. Three points of supports adequately describe the distribution of the latent states suggesting the existence of three profiles of low, medium and high users who shows persistency in their behaviour, but not permanence as some switch to their neighbour's profile.
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© 2021 The Authors. Journal of Applied Econometrics published by John Wiley & Sons, Ltd.