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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
  • Kosali Ilayperuma Simon

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. In contrast to estimates obtained using ordinary least squares, instrumental variables estimates based on the notch suggest that lower-income retirees exhibit considerable income sensitivity in their use of prescription drugs. Our estimates are potentially useful for thinking about the health implications of changes in transfer payments to the elderly and for evaluating the benefits of the recently enacted Medicare prescription drug benefit.

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Bibliographic Info

Paper provided by Center for Policy Research, Maxwell School, Syracuse University in its series Center for Policy Research Working Papers with number 66.

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Length: 43 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:max:cprwps:66

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  1. repec:reg:rpubli:282 is not listed on IDEAS
  2. Victor R. Fuchs, 1980. "Time Preference and Health: An Exploratory Study," NBER Working Papers 0539, National Bureau of Economic Research, Inc.
  3. Kenkel, D.S., 1988. "Health Behavior, Health Knowledge, And Schooling," Papers 10-88-3, Pennsylvania State - Department of Economics.
  4. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-37, October.
  5. W. Kip Viscusi & Joseph E. Aldy, 2003. "The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," NBER Working Papers 9487, National Bureau of Economic Research, Inc.
  6. Gary V. Engelhardt & Jonathan Gruber & Cynthia D. Perry, 2002. "Social Security and Elderly Living Arrangements," NBER Working Papers 8911, National Bureau of Economic Research, Inc.
  7. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  8. Claudia Goldin, 1999. "A Brief History of Education in the United States," NBER Historical Working Papers 0119, National Bureau of Economic Research, Inc.
  9. Gary V. Engelhardt & Jonathan Gruber, 2004. "Social Security and the Evolution of Elderly Poverty," NBER Working Papers 10466, National Bureau of Economic Research, Inc.
  10. repec:reg:wpaper:282 is not listed on IDEAS
  11. John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
  12. Stephen E. Snyder & William N. Evans, 2002. "The Impact of Income on Mortality: Evidence from the Social Security Notch," NBER Working Papers 9197, National Bureau of Economic Research, Inc.
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Cited by:
  1. John Cawley & John R. Moran & Kosali I. Simon, 2008. "The Impact of Income on the Weight of Elderly Americans," NBER Working Papers 14104, National Bureau of Economic Research, Inc.
  2. Joachim Freyberger & Joel Horowitz, 2012. "Identification and shape restrictions in nonparametric instrumental variables estimation," CeMMAP working papers CWP15/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Joachim Freyberger & Joel Horowitz, 2013. "Identification and shape restrictions in nonparametric instrumental variables estimation," CeMMAP working papers CWP31/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Renate Hartwig & Michael Grimm, 2009. "An Assessment of the Effects of the 2002 Food Crisis on Children’s Health in Malawi," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 19, Courant Research Centre PEG.
  5. Florian Heiss & Daniel McFadden & Joachim Winter, 2007. "Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans," NBER Working Papers 13627, National Bureau of Economic Research, Inc.
  6. Holst, Jens, 2008. "Kostenbeteiligung für Patienten - Reformansatz ohne Evidenz! Theoretische Betrachtungen und empirische Befunde aus Industrieländern," Discussion Papers, Research Group Public Health SP I 2008-305, Social Science Research Center Berlin (WZB).
  7. Holst, Jens, 2010. "Patient cost sharing: Reforms without evidence. Theoretical considerations and empirical findings from industrialized countries," Discussion Papers, Research Group Public Health SP I 2010-303, Social Science Research Center Berlin (WZB).

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