Einav, Liran. <br/><br/>
Bunching at the Kink:  Implications for Spending Responses to Health Insurance Contracts / 
Liran Einav, Amy Finkelstein, Paul Schrimpf. 
 - Cambridge, Mass.  National Bureau of Economic Research  2016. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w22369 .
 - Working Paper Series (National Bureau of Economic Research)  no. w22369. .
<br/><br/> June 2016. 
<br/><br/> A large literature in empirical public finance relies on "bunching" to identify a behavioral response to non-linear incentives and to translate this response into an economic object to be used counterfactually. We conduct this type of analysis in the context of prescription drug insurance for the elderly in Medicare Part D, where a kink in the individual's budget set generates substantial bunching in annual drug expenditure around the famous "donut hole." We show that different alternative economic models can match the basic bunching pattern, but have very different quantitative implications for the counterfactual spending response to alternative insurance contracts. These findings illustrate the importance of modeling choices in mapping a compelling reduced form pattern into an economic object of interest.  
<br/><br/>
<br/><br/><br/>System requirements: Adobe [Acrobat] Reader required for PDF files. <br/>Mode of access: World Wide Web.