aging and inequality in income and health in our earlier work we used data from the national health interview survey nhis to examine life cycle patterns in health status and in the joint distribution of health status and income deaton and paxson 1998 in this paper we summarize and extend those results and provide new evidence from the panel study of income dynamics psid both surveys contain a measure of household income and collect information on an ordinal measures of self reported health status srhs that ranges from 1 excellent to 5 poor section i concerns problems related to the measurement of inequality in health section ii presents evidence from the two surveys on health and income inequality this abstract was borrowed from another version of this item

an economic analysis of tax amnesties abstract tax amnesties have frequently been justified as politically popular ways to generate increases in government revenue this paper examines the circumstances under which amnesties are likely to have a beneficial impact on revenue collections it concludes that while in general it may be correct to impose a reduced penalty on individuals who voluntarily disclose tax evasion shortlived amnesties of the type most frequently observed in practice are unlikely to generate genuinely additional revenue particularly when judged against the potential danger of reducing future tax compliance

the effect of income on subjective well being evidence from the 2008 economic stimulus tax rebates this paper uses tax rebate payments from the 2008 economic stimulus to estimate the effect of a one time change in income on three measures of subjective well being life satisfaction health satisfaction and affect the income effect is identified by exploiting the plausibly exogenous variation in the payment schedule of the rebates using both ordinary least squares and two stage least squares estimators i find that the rebates had a large and positive impact on affect which is explained by a reduction in feelings of stress and worry for life satisfaction and health satisfaction there is weaker evidence of a positive impact

the causal effect of income on health evidence from german reunification we investigate whether there was a causal effect of income changes on the health satisfaction of east and west germans in the years following reunification our data source is the german socio economic panel gsoep between 1984 and 2002 and we fit a recently proposed fixed effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition we find evidence of a significant positive effect of income changes on health satisfaction but the quantitative size of this effect is small this is the case with respect to current income and a measure of permanent income

estimating the effect of income on health and mortality using lottery prizes as an exogenous source of variation in income a vast literature has established a strong positive relation between income and health status and a negative relation with mortality this paper studies the effects of income on health and mortality using only the part of income variation due to a truly exogenous factor monetary lottery prizes of individuals the findings are that higher income causally generates good health and that this effect is of a similar magnitude as when traditional estimation techniques are used a 10 percent income increase improves health by about 4 5 percent of a standard deviation

wealth and health behavior testing the concept of a health cost wealthier individuals engage in healthier behavior this paper seeks to explain this phenomenon by exploiting both inheritances and lottery winnings to test a theory of health behavior we distinguish between the direct monetary cost and the indirect health cost value of health lost of unhealthy consumption the health cost increases with wealth and the degree of unhealthiness leading wealthier individuals to consume more healthy and moderately unhealthy but fewer severely unhealthy goods the empirical evidence presented suggests that differences in health costs may indeed partially explain behavioral differences and ultimately health outcomes between wealth groups

an evolutionary interpretation of van huyck battalio and beil s experimental results on coordination this paper proposes an adaptive interpretation of the results of some recent experiments with repeated tacit coordination games these experiments revealed several behavioral regularities including a systematic discrimination between strict nash equilibria in certain games that appear to be driven by strategic uncertainty and are not explained by traditional equilibrium refinements the observed patterns of discrimination correspond closely to predictions based on maynard smith s notion of evolutionary stability an adaptive model in the spirit of the evolutionary dynamics but recognizing the important differences between learning in human populations and evolution promises to yield a unified explanation of the results journal of economic literature classification numbers 020 026

unique equilibrium in a model of self fulfilling currency attacks even though self fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals this unique equilibrium depends not only on the fundamentals but also on financial variables such as the quantity of hot money in circulation and the costs of speculative trading in contrast to multiple equilibrium models our model allows analysis of policy proposals directed at curtailing currency attacks

sizing the government is there such a thing as an optimal government size we investigate the so called armey curve which claims an inverted u shaped relationship between government size and economic performance using non parametric data envelopment analysis dea the dea scores are linked to control variables such as initial per capita income openness population density urbanization country size and family size for 23 oecd countries we estimate the country specific efficiency scores which reveal the extent to which a country uses excess public resources to achieve the observed growth rate of gdp

estimating the effect of unearned income on labor supply earnings savings and consumption evidence from a survey of lottery players this paper provides empirical evidence about the effect of unearned income on earnings consumption and savings using an original survey of people playing the lottery in massachusetts in the mid 1980 s the effects of the magnitude of lottery prizes on economic behavior are analyzed the critical assumption is that among lottery winners the magnitude of the prize is randomly assigned it is found that unearned income reduces labor earnings with a marginal propensity to consume leisure of approximately 11 percent with larger effects for individuals between 55 and 65 years old after receiving about half their prize individuals saved about 16 percent

endogenous entry to security bid auctions we endogenize entry to a security bid auction where participation is costly and bidders must decide given their private valuations whether to participate we first consider any minimum reserve security bid of a fixed expected value that weakly exceeds the asset s value when retained by the seller demarzo kremer and skrzypacz 2005 establish that with a fixed number of bidders auctions with steeper securities yield the seller more revenues counterintuitively we find that auctions with steeper securities also attract more entry further enhancing the revenues from such auctions we then establish that with optimal reserve securities auctions with steeper securities always yield higher expected revenues

taxpayer response to an increased probability of audit evidence from a controlled experiment in minnesota abstract in 1995 a group of 1724 randomly selected minnesota taxpayers was informed by letter that the returns they were about to file would be closely examined compared to a control group that did not receive this letter low and middle income taxpayers in the treatment group on average increased tax payments compared to the previous year which we interpret as indicating the presence of noncompliance the effect was much stronger for those with more opportunity to evade in fact the difference in differences is not statistically significant for those who do not have self employment or farm income and do not pay estimated tax surprisingly however the reported tax liability of the high income treatment group fell sharply relative to the control group

the assessment technology policy current research and problems in science and technology policy are reviewed trends in innovative activity in the g 7 economies during the past two decades are summarized and the economic rationale for policy in this area given policy tools currently in use in many countries include tax credits and subsidies the intellectual property system and competition policy ongoing areas of current controversy are the interaction of intellectual property and competition policies environmental and innovation policy standard setting in industries characterized by network externalities and the privatization of scientific research and its consequences copyright 2002 oxford university press

wealthier is healthier we estimate the effect of income on health using cross country timeseries data on health infant and child mortality and life expectancy and income per capita we use instrumental variables estimates using exogenous determinants of income growth to identify the pure income effect on health isolated from reverse causation or incidental association the long run income elasticity of infant and child mortality in developing countries lies between 0 2 and 0 4 using these estimates we calculate that over a half a million child deaths in the developing world in 1990 alone can be attributed to the poor economic performance in the 1980s

randomness in tax enforcement abstract when there is tax evasion increased randomness about how much taxable income an auditor would assess generally leads to higher reported income and more revenue when reducing randomness is costly optimality requires some randomness in assessed taxable income even if reducing randomness is costless taxpayers may prefer some randomness when the increased revenue can be rebated so that the government s revenue stays fixed

child health and household resources in south africa evidence from the old age pension program this paper presents nonparametric evidence on the effects of the expansion of the old age pension program in south africa on child health did this increase in household resources improve child health and nutrition does the gender of the recipient of the pension affect its impact the answers to these questions have very important policy implications there is evidence that inadequate nutrition during childhood and even in utero affects long term physical development as well as the development of cognitive skills this in turn affects productivity later in life see partha dasgupta 1993 john strauss and duncan thomas 1998 t paul schultz 1999 in the united states the evidence suggests that monetary transfers to the poor have very little impact on child welfare janet currie 1995 susan mayer 1997 however the effects of parental income and monetary transfers on child outcomes are likely to be of greater magnitude among poor households in developing countries the south african pension program provides an unusual opportunity to evaluate the possible effects of such a monetary transfer this paper exploits the rapid increase in the coverage and benefits of the old age pension program in south africa which took place in the early 1990 s anne case and angus deaton 1998 at the end of the apartheid era the government committed to achieving parity of benefits and eligibility requirements between whites and africans this was achieved mostly by increasing the benefits received by the africans in 1993 80 percent of african women above age 60 and 77 percent of african men above 65 received the pension the maximum benefit of 370 rands per month aproximately 3 per day was equal to half of the minimum wage and about twice the median income per capita in rural areas due to living arrangements inherited from the apartheid era close to onethird of african children under the age of 5 currently live with a pension recipient children who live with a pension recipient tend to come from relatively disadvantaged backgrounds as a consequence they tend to be smaller than other children their age to estimate the effect of receiving a pension on the anthropometric status of children this paper exploits the fact that height reflects accumulated investments in child nutrition the larger the proportion of her life during which a child is well nourished the taller she will be given her age due to the expansion of the program in the early 1990 s individuals of qualified age became more likely to receive a pension and the benefits became substantially larger thus children born after the expansion of the program are more likely to have spent a larger fraction of their lives wellnourished if they live with a pension recipient to the extent that the pension resulted in improved nutrition in this paper i present nonparametric evidence of the program s effect on nutrition based on this observation

unexpected windfalls education and mental health evidence from lottery winners in germany this paper investigates the causal impact of large unexpected windfalls on individual mental health physical health as well as health behaviors i use a large individual level panel data set of l

rich and healthy better than poor and sick an empirical analysis of income health and the duration of the pension benefit spell i analyze the relationship between duration of the pension benefit spell and pension benefit claims from the german public pension system with a special emphasis on differential results with respect to health this relationship is crucial for a potential structural pattern of redistribution between different income and health groups induced by the public pension system evidence for such redistribution from poor to rich is present for most of the specifications in my analysis the most adequate specification is partially linear does therefore not impose any parametrical restrictions between duration and benefit claims and allows for potential endogeneity the relationship i extract is clearly positive i also find that redistribution from low income individuals to individuals with high income is more pronounced the worse the health status is despite longer benefit spells for pensioners in ill health

income tax compliance in a principal agent framework previous analyses have modeled income tax evasion as a portfolio problem deriving the optimal consumption of the risky asset unreported income under the assumption of a fixed probability of detection the purpose of this paper is to examine some of these issues in tax compliance starting from a different set of assumptions in particular we compare alternative audit policies to the standard random audit policy we focus on an audit cutoff policy in which an agent triggers an audit if his or her reported income is too low and is not audited if reported income is sufficiently high this paper establishes two major results first random audit rules are weakly dominated by audit cutoff rules it can be shown given lump sum taxes and fines that these audit cutoff rules are the least cost policies which induce truthful reporting of income second the dominance of audit cutoff rules over random audit rules holds for lump sum as well as proportional taxation in fact the equilibrium consequences of the two are equivalent

wealth health and child development evidence from administrative data on swedish lottery players we use administrative data on swedish lottery players to estimate the causal impact of substantial wealth shocks on players own health and their children s health and developmental outcomes our estimation sample is large virtually free of attrition and allows us to control for the factors conditional on which the prizes were randomly assigned in adults we find no evidence that wealth impacts mortality or health care utilization with the possible exception of a small reduction in the consumption of mental health drugs our estimates allow us to rule out effects on 10 year mortality one sixth as large as the crosssectional wealth mortality gradient in our intergenerational analyses we find that wealth increases children s health care utilization in the years following the lottery and may also reduce obesity risk the effects on most other child outcomes including drug consumption scholastic performance and skills can usually be bounded to a tight interval around zero overall our findings suggest that in affluent countries with extensive social safety nets causal effects of wealth are not a major source of the wealth mortality gradients nor of the observed relationships between child developmental outcomes and household income jel codes i10 i14 j24

healthy bodies and thick wallets the dual relation between health and economic status there is abundant evidence of a quantitatively large association between many measures of economic status including income and wealth and a variety of health outcomes such as mortality or morbidity however considerable and often heated debate remains especially across disciplines about the direction of causation and about why the association arises although medical scientists are often convinced that the dominant if not exclusive pathway is that variation in socioeconomic status produces health disparities they are increasingly debating among themselves about why low economic status might lead to poor health at least for modern industrial countries 1 the old standby arguments the less well to do have access to less or lower quality medical care or a stronger pattern of deleterious personal behaviors have been rejected as insufficient instead a series of intriguing competing theories have arisen that emphasize long term impacts of early childhood or even inter uterine environmental factors the cumulative effects of prolonged exposures to individual stressful events or reactions to macro societal factors such as rising levels of income inequality a common link is that each theory attempts to document the physiological processes through which low economic status leads to poorer health while these scientific questions are extremely important this research has taken place with little input from economists economists are now making contributions about the alternative pathway the impact poor health may have on economic resources poor health may restrict a family s capacity to earn income or to accumulate assets by limiting work or by raising medical expenses at a minimum this work should provide a caution against exaggerating the magnitude of causation from economic status to health outcomes but the potential contribution runs deeper as people age the evolving variation in individual health outcomes may offer additional statistical information to estimate parameters of household savings and consumption behavior that so far have proven to be somewhat elusive thus incorporating health uncertainty and risk into economic models should eventually enrich our understanding of basic tenets of household behavior the first section of this paper documents the size of the association between health and one prominent economic status measure household wealth section two deals with how health influences economic status by sketching out reasons why health may alter household savings and eventually wealth and then providing estimates of the empirical magnitude of these effects section three shifts attention to the alternative pathway the links between economic status and health and summarizes 2major controversies and evidence surrounding these issues

government policy and the probability of coordination failures this paper introduces an approach to the study of optimal government policy in economies characterized by a coordination problem and multiple equilibria such models are often criticized as not being useful for policy analysis because they fail to assign a unique prediction to each possible policy choice we employ a selection mechanism that assigns ex ante a probability to each equilibrium indicating how likely it is to obtain we show how such a mechanism can be derived as the natural result of an adaptive learning process this approach leads to a well defined optimal policy problem and has important implications for the conduct of government policy we illustrate these implications using a simple model of technology adoption under network externalities

effects of prenatal poverty on infant health state earned income tax credits and birth weight this study estimates the effects of prenatal poverty on birth weight using changes in state earned income tax credits eitc as a natural experiment we seek to answer two questions about poverty and child wellbeing first are there associations between prenatal poverty and lower birth weights even after factoring out unmeasured potential confounders because birth weight predicts a range of outcomes across the life course lower birth weights that result from poverty may have lasting consequences for children s life chances second how have recent expansions of a work based welfare program i e the eitc affected maternal and infant health in recent decades u s poverty relief has become increasingly tied to earnings and labor markets but the consequences for children s wellbeing remain controversial we find that state eitcs increase birth weights and reduce maternal smoking however results related to afdc tanf and varying eitc effects across maternal ages raise cautionary messages

global inspection games abstract in the tax evasion game a typical example of inspection game audits are costly and audit probabilities are determined by the tax agency based on the tax returns submitted by taxpayers we find that if taxpayers incomes are correlated e g when they are subject to a common shock the optimal audit probability for low declarations is an increasing function of the average declaration as the latter is an informative signal of the realized level of income since a taxpayer s optimal declaration is an increasing function of the probability of an audit the optimal auditing rule creates incentives for taxpayers to coordinate their declarations the resulting coordination game features multiplicity of equilibria and thus strategic uncertainty about the equilibrium that will be selected when we add a source of fundamental uncertainty about the type of agency taxpayers face the situation can be realistically modeled as a global game further and unlike the coordination game before it yields a unique and usually interior equilibrium which is consistent with empirical evidence and supported by the data collected in a computerized experiment the model can be applied to other inspection games of economic interest such as the regulation of industries and the allocation of welfare benefits among others

politicians luck of the draw evidence from the spanish christmas lottery incumbent politicians tend to receive more votes when economic conditions are good in this paper we explore the source of this correlation exploiting the exceptional evidence provided by the spanish christmas lottery because winning tickets are typically sold by one lottery outlet winners tend to be geographically clustered this allows us to study the impact of exogenous good economic conditions on voting behavior we find that incumbents receive significantly more votes in winning provinces the evidence is consistent with a temporary increase in happiness making voters more lenient toward the incumbent or with a stronger preference for the status quo

tax evasion and social interactions the paper extends the standard tax evasion model by allowing for social interactions in manski s manski c f 1993 identification of endogenous social effects the reflection problem review of economic studies 60 3 531 542 nomenclature our model takes into account endogenous interactions i e social conformity effects exogenous interactions i e fairness effects and correlated effects our model is tested using experimental data participants must decide how much income to report given individual and group tax rates and audit probabilities and given a feedback on the other members reporting behavior myopic and self consistent expectations are considered in the analysis in the latter case the estimation is based on a two limit simultaneous tobit with fixed group effects a unique social equilibrium exists when the model satisfies coherency conditions in line with brock and durlauf brock w a durlauf s n 2001b interactions based models in j heckman and e leamer eds handbook of econometrics 5 elsevier science b v 3297 380 the intrinsic nonlinearity between individual and group responses helps identify the model our results provide evidence of fairness effects but reject social conformity

health status and portfolio choice causality or heterogeneity abstract this paper explores the role of unobserved individual characteristics in the health assets and health portfolio correlations we apply various econometrics models to a unique longitudinal dataset with rich information that allows for the exploitation of four different health indices our findings show strong cross sectional correlations between health and both financial and non financial assets but these correlations seem to be mainly driven by heterogeneity as the correlations largely disappear in the fixed effects model adverse health shocks however are found to motivate a safer portfolio choice even after individual fixed effects are controlled for a result consistent with the prediction made by the background risk theory our findings suggest that health shocks shift investment from risky assets toward other financial assets but keep the total financial assets unchanged

money transfer and birth weight evidence from the alaska permanent fund dividend the positive relationship between income and health is well established however the direction of causality remains unclear do economic resources influence health or vice versa exploiting a new source of exogenous income variation this study examines the impact of the alaska permanent fund dividend apfd on newborns health outcomes the results show that income has a significantly positive but modest effect on birth weight we find that an additional 1 000 2 331 in 2011 dollars increases birth weight by 17 7 g and substantially decreases the likelihood of a low birth weight a decrease of around 14 of the sample mean furthermore the income effect is higher for less educated mothers based on a gestation weight profile in the sample increased gestation owing to the apfd could explain a maximum of 34 57 of the measured weight increase although we are unable to examine all the potential mechanisms jel i10 i18 i12

recession depression mental health effects of the 2008 stock market crash do sudden large wealth losses affect mental health we use exogenous variation in the interview dates of the 2008 health and retirement study to assess the impact of large wealth losses on mental health among older u s adults we compare cross wave changes in wealth and mental health for respondents interviewed before and after the october 2008 stock market crash we find that the crash reduced wealth and increased feelings of depression and use of antidepressant drugs and that these effects were largest among respondents with high levels of stock holdings prior to the crash these results suggest that sudden wealth losses cause immediate declines in subjective measures of mental health however we find no evidence that wealth losses lead to increases in clinically validated measures of depressive symptoms or indicators of depression

the dynamics of food insecurity and overall health evidence from the canadian national population health survey the paper explores whether the responses to household food insecurity questions in cycles two and three of the canadian national population health survey help explain the links between socioeconomic status and health at the individual level short term transitions in food insecurity status are correlated with changes in health status there is some evidence for females but not for males that conditional on current health current household food insecurity can lead to lower future health status even in the short run there is stronger evidence for both males and females that conditional on current household food insecurity status lower current health status can lead to an increased probability of future household food insecurity