2000 Volume 7 Pages 65-76
It is important to estimate price elasticity of the medical service demand for evaluating the degree of moral hazard that is caused by health insurance. I estimate price and income elasticities from a linear, log-linear, and the almost ideal demand system (AIDS) model in an effort to show that special attention should be paid to the underlying assumptions of consumer behavior when estimating a medical demand function. In this paper, the previous literature on medical care utilization is extended by incorporating the adjustment process of medical care demand that is the transition from disequilibrium to steady state. The estimation of the dynamic models of medical care demand shows the possibility that the static and linear model underestimates price and income elasticities of the medical care demand.
