Censored Quantile Instrumental Variable Estimates of the Price Elasticity of Expenditure on Medical Care / Amanda E. Kowalski.

Format:

Book

Author/Creator:

Kowalski, Amanda E.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15085.

NBER working paper series no. w15085

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

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.

Notes:

Print version record

June 2009.