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Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts

  • John R. Moran
  • Kosali Ilayperuma Simon

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 implications of changes in transfer payments to the elderly and for evaluating the benefits of the recently enacted Medicare prescription drug benefit.

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Paper provided by Center for Policy Research, Maxwell School, Syracuse University in its series Center for Policy Research Working Papers with number 66.

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Length: 43 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:max:cprwps:66
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  1. Kenkel, Donald S, 1991. "Health Behavior, Health Knowledge, and Schooling," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 287-305, April.
  2. 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, vol. 10(4), pages 412-37, October.
  3. Claudia Goldin, 1999. "A Brief History of Education in the United States," NBER Historical Working Papers 0119, National Bureau of Economic Research, Inc.
  4. Gary V. Engelhardt & Jonathan Gruber, 2004. "Social Security and the Evolution of Elderly Poverty," NBER Working Papers 10466, National Bureau of Economic Research, Inc.
  5. repec:reg:rpubli:282 is not listed on IDEAS
  6. 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.
  7. 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, vol. 27(1), pages 5-76, August.
  8. 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.
  9. Victor R. Fuchs, 1980. "Time Preference and Health: An Exploratory Study," NBER Working Papers 0539, National Bureau of Economic Research, Inc.
  10. 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.
  11. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
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