Have a Drink on Us: Mental Health Parity, Rational Addiction, and Off-Setting Behavior

32 Pages Posted: 22 Oct 2002  

Jonathan Klick

University of Pennsylvania Law School; Erasmus School of Law; PERC - Property and Environment Research Center

Date Written: October 7, 2002

Abstract

I augment the standard rational addiction model to include an insurance component whereby the effects of addiction can be mitigated. The model implies that increasing the level of insurance in the future induces a forward-looking individual to consume more of a harmfully addictive good currently. I test this implication using the adoption of mental health parity mandates in some states during the 1990s as an exogenous shock on the availability of future insurance. I examine the effects of this shock on the consumption of alcohol and find that parity legislation led to a statistically significant increase in alcohol consumption. To account for the possible endogeneity of the adoption of mental health parity mandates, I perform an instrumental variables analysis of beer consumption, and find that my original analysis underestimates the effect by a factor of ten.

Keywords: Rational Addiction, Alcohol, Mental Health, Insurance, Parity

JEL Classification: I12, I18, K32, J32

Suggested Citation

Klick, Jonathan, Have a Drink on Us: Mental Health Parity, Rational Addiction, and Off-Setting Behavior (October 7, 2002). George Mason Law & Economics Research Paper No. 02-25. Available at SSRN: https://ssrn.com/abstract=338200 or http://dx.doi.org/10.2139/ssrn.338200

Jonathan Klick (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
2157463455 (Phone)

Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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