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Suppose that there are two countries, Beta and Gamma. Suppose further that everyone in country Beta is on Insurance B and everyone in country Gamma

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Suppose that there are two countries, Beta and Gamma. Suppose further that everyone in country Beta is on Insurance B and everyone in country Gamma is on Insurance G. Suppose further that both governments use government-set price controls. In 2005, country Beta decided to change the reimbursement rate for pharmaceuticals, but country Gamma did not make this change. You, a researcher, want to study the effect of offering coverage for this drug had an impact on health expenditures. You have average health expenditures for State Beta and Gamma prior to 2005 and post- 2005. Using the information in the table below, a quick difference-in-difference calculation suggests covering this drug _by approximately Time Periods State Pre-2005 Post-2005 State Beta $1000 $1400 State $1500 $1700 Gamma decreased; $400 O decreased; $200 O increased; $400 O increased; $200

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