Title
The Price Elasticity of Demand for Pharmaceuticals amongst High Income Older People in Australia: A Natural Experiment
Document Type
Journal Article
Publication Date
February 2008
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.
Download
Publication Details
This working paper was originally published as Siminski, P, The Price Elasticity of Demand for Pharmaceuticals amongst High Income Older People in Australia: A Natural Experiment, Working Paper 08-02, Department of Economics, University of Wollongong, 2008.