Censored Quantile Instrumental Variable Estimates of the Price Elasticity of Expenditure on Medical Care

Amanda Kowalski

No 15085, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The extent to which consumers respond to marginal prices for medical care is important for policy. Using recent data and a new censored quantile instrumental variable (CQIV) estimator, I estimate the price elasticity of expenditure on medical care. The CQIV estimator allows the estimates to vary across the skewed expenditure distribution, it allows for censoring at zero expenditure nonparametrically, and it allows for the insurance-induced endogenous relationship between price and expenditure. For identification, I rely on cost sharing provisions that generate marginal price differences between individuals who have injured family members and individuals who do not. I estimate the price elasticity of expenditure on medical care to be stable at -2.3 across the .65 to .95 conditional quantiles of the expenditure distribution. These quantile estimates are an order of magnitude larger than previous mean estimates. I consider several explanations for why price responsiveness is larger than previous estimates would suggest.

JEL-codes: I1 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-ecm, nep-hea and nep-ias
Note: AG EH
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Citations: View citations in EconPapers (38)

Published as Amanda Kowalski, 2016. "Censored Quantile Instrumental Variable Estimates of the Price Elasticity of Expenditure on Medical Care," Journal of Business & Economic Statistics, vol 34(1), pages 107-117.

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