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

Listed author(s):
  • Amanda Kowalski

Efforts to control medical care costs depend critically on how individuals respond to prices. I estimate the price elasticity of expenditure on medical care using a censored quantile instrumental variable (CQIV) estimator. CQIV allows estimates to vary across the conditional expenditure distribution, relaxes traditional censored model assumptions, and addresses endogeneity with an instrumental variable. My instrumental variable strategy uses a family member’s injury to induce variation in an individual’s own price. Across the conditional deciles of the expenditure distribution, I find elasticities that vary from −0.76 to −1.49, which are an order of magnitude larger than previous estimates. Supplementary materials for this article are available online.

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File URL: http://hdl.handle.net/10.1080/07350015.2015.1004072
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Article provided by Taylor & Francis Journals in its journal Journal of Business & Economic Statistics.

Volume (Year): 34 (2016)
Issue (Month): 1 (January)
Pages: 107-117

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Handle: RePEc:taf:jnlbes:v:34:y:2016:i:1:p:107-117
DOI: 10.1080/07350015.2015.1004072
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  1. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-277, June.
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  13. Hong H. & Chernozhukov V., 2002. "Three-Step Censored Quantile Regression and Extramarital Affairs," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 872-882, September.
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