The Price Elasticity of Demand for Pharmaceuticals amongst High Income Older People in Australia: A Natural Experiment

Peter Matthew Siminski ()

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

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

Keywords: price elasticity; pharmaceuticals; Australia (search for similar items in EconPapers)
JEL-codes: D12 H42 I11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea
Date: Written

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