Title

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

RIS ID

38617

Publication Details

Siminski, P. M. (2011). The price elasticity of demand for pharmaceuticals amongst high-income older Australians: a natural experiment. Applied Economics, 43 (30), 4835-4846.

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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Link to publisher version (DOI)

http://dx.doi.org/10.1080/00036846.2010.498361