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The Price Elasticity of Demand for Pharmaceuticals amongst High Income Older People in Australia: A Natural Experiment

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Abstract

This paper estimates the price elasticity of demand for pharmaceuticals amongst high-income older people in Australia. It exploits a natural experiment by which some people gained entitlement to a price reduction through the Commonwealth Seniors Health Card (CSHC). To the author’s knowledge, this is the first study of the price elasticity of demand for pharmaceuticals amongst older people that draws on a natural experiment with a control group. The preferred model is a nonlinear Instrumental Variable (IV) difference-in-difference regression, estimated on nationally representative repeated cross sectional survey data using the Generalised Method of Moments. No significant evidence is found for endogenous card take-up, and so cross-sectional estimates are also considered. Taking all of the results and possible sources of bias into account, the ‘headline’ estimate is -0.1, implying that quantity demanded is not highly responsive to price

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/web/uow042786.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp08-02.

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Length: 60 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:uow:depec1:wp08-02

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
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Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Keywords: price elasticity; pharmaceuticals; Australia;

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