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Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts

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  • John R. Moran
  • Kosali Ilayperuma Simon

Abstract

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.

Suggested Citation

  • John R. Moran & Kosali Ilayperuma Simon, 2004. "Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts," Center for Policy Research Working Papers 66, Center for Policy Research, Maxwell School, Syracuse University.
    • Handle: RePEc:max:cprwps:66
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    Cited by:

    1. Joachim Freyberger & Joel L. Horowitz, 2013. "Identification and shape restrictions in nonparametric instrumental variables estimation," CeMMAP working papers CWP31/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Holst, Jens, 2010. "Patient cost sharing: Reforms without evidence. Theoretical considerations and empirical findings from industrialized countries," Discussion Papers, Research Group Public Health SP I 2010-303, WZB Berlin Social Science Center.
    3. John Cawley & John Moran & Kosali Simon, 2010. "The impact of income on the weight of elderly Americans," Health Economics, John Wiley & Sons, Ltd., vol. 19(8), pages 979-993, August.
    4. Joachim Freyberger & Joel L. Horowitz, 2012. "Identification and shape restrictions in nonparametric instrumental variables estimation," CeMMAP working papers CWP15/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    5. Engelhardt, Gary V., 2008. "Social security and elderly homeownership," Journal of Urban Economics, Elsevier, vol. 63(1), pages 280-305, January.
    6. Goda, Gopi Shah & Golberstein, Ezra & Grabowski, David C., 2011. "Income and the utilization of long-term care services: Evidence from the Social Security benefit notch," Journal of Health Economics, Elsevier, vol. 30(4), pages 719-729, July.
    7. Renate Hartwig & Michael Grimm, 2009. "An Assessment of the Effects of the 2002 Food Crisis on Children’s Health in Malawi," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 19, Courant Research Centre PEG.
    8. Florian Heiss & Daniel McFadden & Joachim Winter, 2010. "Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans," NBER Chapters, in: Research Findings in the Economics of Aging, pages 413-481, National Bureau of Economic Research, Inc.
    9. Holst, Jens, 2008. "Kostenbeteiligung für Patienten - Reformansatz ohne Evidenz! Theoretische Betrachtungen und empirische Befunde aus Industrieländern," Discussion Papers, Research Group Public Health SP I 2008-305, WZB Berlin Social Science Center.
    10. Vere, James P., 2011. "Social Security and elderly labor supply: Evidence from the Health and Retirement Study," Labour Economics, Elsevier, vol. 18(5), pages 676-686, October.
    11. Li Tao & Lingnan Tai & Manling Qian & Maozai Tian, 2023. "A New Instrumental-Type Estimator for Quantile Regression Models," Mathematics, MDPI, vol. 11(15), pages 1-26, August.

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    More about this item

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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