This dissertation examines the effects of pension income and total household income on elderly Russian women's decision to obtain prescribed or recommended drugs and their subsequent health. The conceptual framework is a dynamic utility maximization problem that incorporates incertain health and is based on concepts from the unitary model of household consumption and Grossman's model of the demand for health. The modeled outcomes include the probability of having drugs prescribed, the decision to obtain drugs and the health outcome, which are jointly estimated as a set of equations using the discrete factor approximation method that controls for individual, timeinvariant unobserved heterogeneity. The sample is constructed from the Russia Longitudinal Monitoring Survey rounds between 1994 and 2002.
The study finds that income has a modest positive effect on health of Russian elderly women, but does not find evidence of income affecting their decision to obtain drugs. Contrary to the unitary model, the relative control over household resources matters because an increase in pension income has a much larger positive effect on the elderly woman's health than an increase in some other household member's income. This study also finds that obtaining all prescribed or recommended drugs lowers the probability of descending into bad health by 10 percentage points for women with good or average lagged self-assessed lagged health that were prescribed drugs, implying that drug therapy can be an effective form of disease management.