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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 care usage implications of any changes in transfer payments to the elderly that may occur in the future, and for evaluating the benefits of the recently enacted Medicare prescription drug benefit.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11068.

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Date of creation: Jan 2005
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Publication status: published as Moran, J. and K. Simon 2006. “Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts.” Journal of Human Resources 41, 2 (February 2006): 411–432.
Handle: RePEc:nbr:nberwo:11068

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  1. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, Econometric Society, vol. 65(3), pages 557-586, May.
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  3. Kenkel, D.S., 1988. "Health Behavior, Health Knowledge, And Schooling," Papers, Pennsylvania State - Department of Economics 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, University of Chicago Press, vol. 10(4), pages 412-37, October.
  5. Claudia Goldin, 1999. "A Brief History of Education in the United States," NBER Historical Working Papers, National Bureau of Economic Research, Inc 0119, National Bureau of Economic Research, Inc.
  6. Gary V. Engelhardt & Jonathan Gruber, 2004. "Social Security and the Evolution of Elderly Poverty," NBER Working Papers 10466, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. Victor R. Fuchs, 1980. "Time Preference and Health: An Exploratory Study," NBER Working Papers 0539, National Bureau of Economic Research, Inc.
  10. Viscusi, W Kip & Aldy, Joseph E, 2003. " The Value of a Statistical Life: A Critical Review of Market Estimates throughout the World," Journal of Risk and Uncertainty, Springer, Springer, vol. 27(1), pages 5-76, August.
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  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. 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.
  2. 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).
  3. 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.
  4. 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).
  5. Florian Heiss & Daniel McFadden & Joachim Winter, 2010. "Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans," NBER Chapters, in: Research Findings in the Economics of Aging, pages 413-481 National Bureau of Economic Research, Inc.
  6. 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.
  7. 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.

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