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Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts

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  • John R. Moran
  • JKosali Ilayperuma Simon
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    Abstract

    We use exogenous variation in Social Security payments created by the Social Security benefits notch to estimate how retirees’ use of prescription medications responds to changes in their incomes. Using data from the 1993 Wave of the AHEAD, we obtain instrumental variables estimates of the income elasticity of prescription drug use that are uniformly above one, with a middle estimate of 1.32. Simulations based on our estimates suggest that reductions in Social Security benefits similar to those incorporated in recent reform proposals would significantly reduce prescription drug use among the elderly.

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    File URL: http://jhr.uwpress.org/cgi/reprint/XLI/2/411
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    Bibliographic Info

    Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

    Volume (Year): 41 (2006)
    Issue (Month): 2 ()
    Pages:

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    Handle: RePEc:uwp:jhriss:v:41:y:2006:i:2:p411-432

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    Web page: http://jhr.uwpress.org/

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    Cited by:
    1. Gopi Shah Goda & Ezra Golberstein & David C. Grabowski, 2010. "Income and the Utilization of Long-Term Care Services: Evidence from the Social Security Benefit Notch," NBER Working Papers 16076, National Bureau of Economic Research, Inc.
    2. Joachim Freyberger & Joel Horowitz, 2013. "Identification and shape restrictions in nonparametric instrumental variables estimation," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP31/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    3. John Cawley & John Moran & Kosali Simon, 2010. "The impact of income on the weight of elderly Americans," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(8), pages 979-993, August.
    4. Joachim Freyberger & Joel Horowitz, 2012. "Identification and shape restrictions in nonparametric instrumental variables estimation," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP15/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    5. Owen O'Donnell & Eddy Van Doorslaer & Tom Van Ourti, 2013. "Health and Inequality," Tinbergen Institute Discussion Papers, Tinbergen Institute 13-170/V, Tinbergen Institute.
    6. Engelhardt, Gary V., 2008. "Social security and elderly homeownership," Journal of Urban Economics, Elsevier, vol. 63(1), pages 280-305, January.
    7. Vere, James P., 2011. "Social Security and elderly labor supply: Evidence from the Health and Retirement Study," Labour Economics, Elsevier, Elsevier, vol. 18(5), pages 676-686, October.

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