Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts
John R. Moran
Penn State University
Kosali Ilayperuma Simon
Indiana University Bloomington - School of Public & Environmental Affairs (SPEA); National Bureau of Economic Research (NBER)
December 1, 2004
Syracuse University Center for Policy Research Working Paper No. 66
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.
Number of Pages in PDF File: 43
JEL Classification: I12, J14working papers series
Date posted: April 18, 2011
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