Correcting for transitory effects in RCTs: Evidence from the RAND Health Insurance Experiment
In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Band 56, Heft 1, S. 288-305
ISSN: 1540-5982
AbstractTemporary randomized controlled trials are susceptible to transitory effects that would not result from a permanent treatment. We find a large and statistically significant "deadline effect"—a surge in spending in the final treatment year—in the RAND Health Insurance Experiment, identified by random allocation to three‐ or five‐year enrolment terms. Participants facing lower coinsurance rates show larger spending surges. Partialing out the price–deadline interaction reduces in magnitude estimates of the permanent price elasticity of drug spending (and in some specifications of outpatient and supplies spending). This implies higher optimal coinsurance rates and illustrates the importance of experimental design to identifying parameters of interest in randomized controlled trials.