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Censored Quantile Instrumental Variable Estimates of the Price Elasticity of Expenditure on Medical Care

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  • Amanda E. Kowalski

Abstract

The extent to which consumers respond to marginal prices for medical care is important for policy. Using recent data and a new censored quantile instrumental variable (CQIV) estimator, I estimate the price elasticity of expenditure on medical care. The CQIV estimator allows the estimates to vary across the skewed expenditure distribution, it allows for censoring at zero expenditure nonparametrically, and it allows for the insurance-induced endogenous relationship between price and expenditure. For identification, I rely on cost sharing provisions that generate marginal price differences between individuals who have injured family members and individuals who do not. I estimate the price elasticity of expenditure on medical care to be stable at -2.3 across the .65 to .95 conditional quantiles of the expenditure distribution. These quantile estimates are an order of magnitude larger than previous mean estimates. I consider several explanations for why price responsiveness is larger than previous estimates would suggest.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15085.

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Date of creation: Jun 2009
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Handle: RePEc:nbr:nberwo:15085

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Cited by:
  1. Duarte, Fabian, 2012. "Price elasticity of expenditure across health care services," Journal of Health Economics, Elsevier, vol. 31(6), pages 824-841.
  2. Victor Chernozhukov & Ivan Fernandez-Val & Amanda Kowalski, 2011. "Quantile Regression with Censoring and Endogeneity," Cowles Foundation Discussion Papers 1797, Cowles Foundation for Research in Economics, Yale University.
  3. Pollmann, Daniel & Dohmen, Thomas & Palm, Franz C., 2012. "Robust Estimation of Wage Dispersion with Censored Data: An Application to Occupational Earnings Risk and Risk Attitudes," IZA Discussion Papers 6447, Institute for the Study of Labor (IZA).
  4. Jonathan T. Kolstad & Amanda E. Kowalski, 2010. "The Impact of Health Care Reform On Hospital and Preventive Care: Evidence from Massachusetts," NBER Working Papers 16012, National Bureau of Economic Research, Inc.
  5. Liran Einav & Amy Finkelstein & Stephen Ryan & Paul Schrimpf & Mark Cullen, 2011. "Selection on Moral Hazard in Health Insurance," Discussion Papers 10-027, Stanford Institute for Economic Policy Research.
  6. Amanda E. Kowalski, 2012. "Estimating the Tradeoff Between Risk Protection and Moral Hazard with a Nonlinear Budget Set Model of Health Insurance," NBER Working Papers 18108, National Bureau of Economic Research, Inc.
  7. Aviva Aron-Dine & Liran Einav & Amy Finkelstein & Mark R. Cullen, 2012. "Moral Hazard in Health Insurance: How Important Is Forward Looking Behavior?," NBER Working Papers 17802, National Bureau of Economic Research, Inc.
  8. Kwak, Sungil, 2011. "The Impact of Taxes on Charitable Giving: Empirical Evidence from the Korean Labor and Income Panel Study," MPRA Paper 36845, University Library of Munich, Germany.
  9. Neale Mahoney, 2011. "Bankruptcy as Implicit Health Insurance," Discussion Papers 10-023, Stanford Institute for Economic Policy Research.
  10. Aviva Aron-Dine & Liran Einav & Amy Finkelstein & Mark Cullen, 2012. "Moral hazard in health insurance: How important is forward looking behavior?," Discussion Papers 11-007, Stanford Institute for Economic Policy Research.
  11. Schmillen, Achim & Umkehrer, Matthias, 2013. "The scars of youth : effects of early-career unemployment on future unemployment experience," IAB Discussion Paper 201306, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  12. Aviva Aron-Dine & Liran Einav & Amy Finkelstein, 2012. "The RAND Health Insurance Experiment, Three Decades Later," NBER Working Papers 18642, National Bureau of Economic Research, Inc.
  13. Boes, Stefan & Gerfin, Michael, 2013. "Does Full Insurance Increase the Demand for Health Care?," IZA Discussion Papers 7689, Institute for the Study of Labor (IZA).
  14. Mas, Nuria & Cirera, Laia & Viñolas, Guillem, 2011. "Los sistemas de copago en Europa, Estados Unidos y Canadá: Implicaciones para el caso español," IESE Research Papers D/939, IESE Business School.
  15. Aviva Aron-Dine & Liran Einav & Amy Finkelstein, 2012. "We re-present and re-examine the analysis from the famous RAND Health Insurance Experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending. We begin by su," Discussion Papers 12-007, Stanford Institute for Economic Policy Research.
  16. Helmut Farbmacher; & Joachim Winter, 2012. "Non-linear price schedules, demand for health care and response behavior," Health, Econometrics and Data Group (HEDG) Working Papers 12/15, HEDG, c/o Department of Economics, University of York.
  17. Pieroni, Luca & Salmasi, Luca, 2012. "Smoking habit changes and body weight: causal estimates from the British Household Panel Survey," MPRA Paper 43465, University Library of Munich, Germany.
  18. repec:hhs:slucer:2014_007 is not listed on IDEAS

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