Working Papers

Targeting Policies: Multiple Testing and Distributional Treatment Effects (with Steven F. Lehrer and Kyungchul Song) [Online Appendix]

Abstract: Economic theory suggests that individual responses to welfare reform depend on pre-treatment labor supply and other characteristics. Resulting changes in earnings may be positive or negative, leading to heterogenous treatment effects. In this paper, we extend the literature on treatment effect heterogeneity by introducing six nonparametric tests that are implemented using bootstrap testing of functional inequalities. The proposed tests treat treatment effect heterogeneity as a multiple testing problem and make corrections for the family-wise error rate. To facilitate comparisons to the existing literature we reexamine the extent of heterogeneity in labor supply responses to the Jobs First welfare experiment across both quantiles of outcome distribution for the full sample as well as individual subgroups. Our results shed new light on who truly benefits from welfare reform and demonstrate the importance of correcting for multiple testing.

Minimum Wages and Healthy Diet (with Kathryn L. Clark and Ryan C. Thomas)

Abstract: A healthy diet is often unaffordable for low-income individuals, so income-lifting policies may play an important role in not only alleviating poverty but also in improving nutrition. We investigate if higher minimum wages can contribute to an improved diet by increasing consumption of fruits and vegetables. Exploiting recent minimum wage increases in the U.S. and using individual-level data from the Behavioral Risk Factor Surveillance System we identify the causal effect of minimum wage changes on fruit and vegetable intake among low-wage individuals in a triple-differences framework. Our results indicate that higher minimum wages contribute positively but moderately to improved nutrition.

Patient vs. Provider Incentives in Long Term Care (with Martin B. Hackmann) [email me for draft]

Abstract: Up to 30% of U.S. health care spending is wasteful. Understanding how provider and patient incentives contribute to overspending is of growing policy relevance as health care expenditures are rising. Empirical work traditionally estimates these incentives in isolation. In this paper, we develop and estimate an empirical model of nursing home utilization, which nests both incentives. To identify patient incentives, we rely on variation in out-of-pocket prices around within-stay transitions from full out-of-pocket pay to Medicaid coverage. On the provider side, we exploit dynamic incentives regarding the optimal payer type mix when capacity constraints are binding. Using administrative micro data from California, New Jersey, Ohio, and Pennsylvania, we find that nursing homes increase their efforts to discharge relatively healthy Medicaid beneficiaries to the community when the occupancy rate rises, in order to allocate remaining beds to more profitable private payers. On the patient side, we find that residents decrease their efforts to leave a nursing home for a community option as they become eligible for Medicaid. We find no health benefits from longer nursing homes stays among the relatively healthy marginal residents who exhibit only minor limitations. Our results imply reductions in Medicaid spending of up to $10 billion per year if Medicaid-covered stays are reduced to the length of out-of-pocket stays. Finally, we estimate a structural model of discharge management, which allows us to conduct a “horse-race” between patient and provider incentives in counterfactual experiments. Our findings suggest that changing patient incentives is more effective than modifying provider incentives in shortening the length of stay. As a result, we find that vouchers and co-pay options for Medicaid beneficiaries lead to larger cost savings than reductions in provider prices.

Labor Market Effects of Medical Innovation: The Case of Breast and Prostate Cancer (with Sung-Hee Jeon) [email me for draft]

Abstract: Innovations in cancer treatment have lowered mortality, but little is know about their economic benefits. In this paper, we assess the effect of improved treatment options over the last three decades on the labor market outcomes of breast and prostate cancer patients. We combine administrative tax return and cancer registry data from Canada with measures of medical innovation (approved drugs, academic publications, and patents) to estimate triple-differences regressions of employment and annual earnings. Our results show that the reductions in these labor market outcomes among cancer patients are partially offset by improved treatment options. Specifically, the decline in employment due to a cancer diagnosis is cut by 50 to 75 percent by the medical innovation that has occurred during the last three decades.

Health Shocks, Human Capital, and Labor Market Outcomes (with Francisco Parro) [email me for draft]

Abstract: The relationships between health, human capital, and labor market outcomes are complex and not fully understood. We explore them using high frequency administrative data from an emerging economy. Using hospitalizations as a proxy for health shocks, we first document that higher levels of educational attainment mitigate the negative labor market effects of health events. This evidence informs a flexible yet tractable dynamic model of human capital accumulation in the presence of health shocks. We  estimate the model, which allows us to disentangle pathways between health and labor market outcomes operating through education, type of job, and access to health care.

Wage Premiums, Shirking Deterrence, Gift Exchange and Employee Quality: Firm Evidence (with Constanca Esteves-Sorenson and Ernesto Freitas) [email me for draft]

Abstract: Why may firms pay efficiency wages: above-market clearing wages which are not contingent on output? We explore the contribution to productivity of three main mechanisms underpinning efficiency wages (shirking, gift-exchange, and selection) by exploring a novel personnel data set from two Portuguese hotel chains as well as particular features of the Portuguese labor market. We find evidence of the three mechanisms. In the first firm, higher wage premiums at the time of hiring decrease shirking, consistent with selection. Higher yearly wage premiums also reduce shirking, consistent with the shirking and gift-exchange models. However, tenure induces an increase in shirking which is consistent with the shirking model.