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The price elasticity of demand for pharmaceuticals amongst high-income older Australians: a natural experiment

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Abstract

Most high-income older Australians became eligible for a pharmaceutical concession through a 1999 policy change. I exploit this natural experiment to estimate their price elasticity of demand for pharmaceuticals. The preferred model is a nonlinear Instrumental Variable (IV) regression, estimated on nationally representative repeated cross-sectional survey data using the Generalized Method of Moments (GMM). No significant evidence is found for endogenous take-up, and so cross-sectional estimates are also considered. Taking all of the results into account, the 'headline' estimate is -0.1, implying that quantity demanded is not highly responsive to price.

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  • P. Siminski, 2011. "The price elasticity of demand for pharmaceuticals amongst high-income older Australians: a natural experiment," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4835-4846.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:30:p:4835-4846
    DOI: 10.1080/00036846.2010.498361
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    1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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    1. Johnston, David W. & Shields, Michael A. & Siminski, Peter, 2016. "Long-term health effects of Vietnam-era military service: A quasi-experiment using Australian conscription lotteries," Journal of Health Economics, Elsevier, vol. 45(C), pages 12-26.
    2. Nguyen, Ha & Connelly, Luke B., 2017. "Cost-sharing in health insurance and its impact in a developing country– Evidence from a quasi-natural experiment," MPRA Paper 76399, University Library of Munich, Germany.

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