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

Peter Siminski

Applied Economics, 2011, vol. 43, issue 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.

Date: 2011
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DOI: 10.1080/00036846.2010.498361

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