effluent regulation and long run optimality a regulator faced with free entry of firms is concerned not only with the implications of public policy for the discharges from a representative firm but also with the total pollution observed at the long run market equilibrium the regulator must take into account not only the effects of regulations upon the net marginal returns of the firm but must also consider the total profit of the firm and incentives for entry and exit this paper shows that effluent charges and tradeable effluent permits lead to long run optimality with entry of small firms the difference between firm payments and environmental damages is interpreted as the rent accruing to the environmental resource this result applies only to the competitive case with small polluters the analysis presented here allows a comparison and clarification of the literature on small and large polluters in a multi input framework with social damages dependent upon total effluents effluent charges are shown here to result in socially optimal entry confirming an assertion of baumol and oates 2 p 179 fn 161 and the important result of schulze and d arge 15 by taking average as well as marginal damages into account the effluent charge results in optimal firm scale levels and the correct input mix at the free entry market equilibrium the firm subject to an effluent tax will operate above or below the private minimum efficient scale depending upon whether average external costs exceed or are less than marginal external costs since public policy to reduce effluents is often directed at reducing the effluentgenerating activity some policy recommendations include a tax on the final output of the polluting firm in some theoretical analyses a relation between the output of the firm and the effluent level is identified and a pigouvian output tax is applied this approach should not be followed by policymakers since an output tax does not provide firms with the correct incentives for either input substitution or market entry it is shown that while a lump sum transfer is needed to provide correct entry incentives when a pigouvian output tax is applied no such transfer is needed if the tax is correctly applied to effluents contrary to 5 even if optimal firm scale and i thank the referees for helpful suggestions the support of the national science foundation under grant ses 82 19121 is gratefully acknowledged any errors are my responsibility 103

the importance of group coverage how tax policy shaped u s health insurance in 1954 the internal revenue service stipulated that employer contributions to the health insurance plans of their employees were to be excluded from employee taxable income today the tax subsidy is major feature of the u s health care market this paper examines the initial effects of the tax subsidy on the demand for health insurance using previously unexamined data from 1953 and 1958 results suggest that the tax subsidy increased the growth of group insurance particularly among union members and employed persons this is a critical effect because group insurance is not only less expensive than individual insurance but it is also easier to obtain and households with access to group health insurance are far more likely to purchase health insurance coverage than those without similar access by increasing access to group insurance the tax subsidy fostered an increase in the purchase of group health insurance by people who may not have purchased individual coverage and generated institutional change as it cemented an employment based system of group health insurance in the united states this abstract was borrowed from another version of this item

sources of intra industry wage dispersion how much do employers matter observed human capital explains less than half of wage variation in bls industry wage surveys establishment based wage differentials controlling for occupation account for 20 70 percent of intra industry wage variation this corresponds to a standard deviation in wages of 14 percent of the mean almost as large as interindustry wage variation investigation suggests that establishment wage differentials are not random variations or returns to usual measures of human capital

cyclical and market determinants of involuntary part time employment we examine the determinants of involuntary part time employment focusing on variation associated with the business cycle and variation attributable to more persistent structural features of the labor market our theoretical framework distinguishes between workers decision to seek part time work and employer demand for part time work hours emphasizing demand and supply determinants of involuntary part time work such as workplace technology labor costs and workforce demographics we conduct regression analyses using state level panel and individual data for the years 2003 2014 the results show that the combination of cyclical variation and the influence of market level factors can explain virtually all of the variation in the aggregate incidence of involuntary part time employment since the great recession

does public insurance crowd out private insurance the cost of expanding public sector health programs depends critically on the extent to which public eligibility will cover just the uninsured or will crowd out existing private insurance coverage we estimate the extent of crowd out arising from the expansions of medicaid to pregnant women and children over the 1987 1992 period we estimate that approximately 50 percent of the increase in medicaid coverage was associated with a reduction in private insurance coverage this occurred largely because employees took up employer based insurance less frequently there is also some evidence that employers contributed less for insurance and that workers dropped coverage of dependents

nondiscrimination rules and the distribution of fringe benefits this article considers the impact of nondiscrimination nd rules in the federal tax code nondiscrimination rules limit within firm inequality in the provision on nonwage benefits but they place no corresponding limit on within firm inequality in wages firms can skirt nd rules by moving workers with unusual benefits into part time and seasonal positions because workers in such positions are excluded from some nd compliance calculations we examine these issues empirically and find relationships consistent with the hypothesis that nd rules provide a binding constrain on within firms benefits inequality

from the fringe to the fore labor unions and employee compensation conventional wisdom suggests that labor unions raise worker wages while the newer empirical literature finds only negligible earnings effects i reconcile this apparent contradiction by arguing th

the labor market effects of rising health insurance premiums we estimate the effect of rising health insurance premiums on wages employment and the distribution of part time and full time work using variation in medical malpractice payments driven by the recent medical malpractice crisis we estimate that a 10 increase in health insurance premiums reduces the aggregate probability of being employed by 1 2 percentage points reduces hours worked by 2 4 and increases the likelihood that a worker is employed only part time by 1 9 percentage points for workers covered by employer provided health insurance this increase in premiums results in an offsetting decrease in wages of 2 3

estimating workers marginal valuation of employer health benefits would insured workers prefer more health insurance or higher wages abstract in recent years the cost of health insurance has been increasing much faster than wages in the face of these rising costs many employers will have to make difficult decisions about whether to cut back health benefits or to compensate workers with lower wages or lower wage growth in this paper we ask the question which do workers value more one additional dollar s worth of health benefits or one more dollar in their pockets using a new approach to obtaining estimates of insured workers marginal valuation of health benefits this paper estimates how much on average employees value the marginal dollar paid by employers for their workers health insurance we find that insured workers value the marginal health premium dollar at significantly less than the marginal wage dollar however workers value insurance generosity very highly the marginal dollar spent on health insurance that adds an additional dollar s worth of observable dimensions of plan generosity such as lower deductibles or coverage of additional services is valued at significantly more than one dollar

international trade and environmental quality how important are the linkages this paper develops a numerical general equilibrium model of the world economy with local and global environmental externalities the model is then used to investigate the relationship between trade and the environment the authors results suggest that international trade has little impact on environmental quality furthermore the magnitude of the welfare effects of environmental policies is not significantly affected by changes in trade policies at the same time the size and distribution of the gains from trade liberalization appear to be little affected by changes in environmental policies

effects of the tax treatment of fringe benefits on labor market segmentation current federal tax law requires that all workers having the same experience with a firm must receive essentially the same package of fringe benefits in order for those benefits to qualify for preferential tax treatment the authors argue that this nondiscriminatory provision of fringe benefits promotes labor market segmentation by inducing workers to sort themselves across the economy according to their demand for fringe benefits several empirical tests using 1968 78 data confirm the existence of sorting and suggest that labor market segmentation increased over time as workers responded to changes in incomes and marginal tax rates

free riding carbon treaties and trade wars the role of domestic environmental policies this paper uses a calibrated general equilibrium model of north south trade with carbon emissions to explore the strategic open economy implications of price and quantity based instruments for co2 emission reduction we compute non cooperative environmental and trade policy equilibria and nash bargaining outcomes in environmental policies with side payments of cash results show that quotas can lead to higher internalization levels in a non cooperative zero tariff equilibrium in comparison with emission fees if tariffs are also chosen non cooperatively the form of policy instrument used affects equilibrium tariffs with quotas leading to lower trade barriers particularly under a regional carbon treaty

the elusive wage benefit trade off the case of employer provided health insurance this study shows that standard regressions estimated to measure a trade off between wages and health insurance are misspecified by insufficiently accounting for establishment and firm size an interactive size corrected specification is more likely to reveal a trade off furthermore because insurance decisions are typically made by firms and wages set by establishments the insurance constraint on establishments in multi establishment firms weakens the trade off we use model generated data to show that both factors contribute to the failure in previous research to identify a trade off and data from a cross section of northern californian establishments to test for a trade off in multi establishment and single establishment firms

adverse selection in health insurance markets evidence from state small group health insurance reforms abstract the past decade witnessed major changes in state laws governing the sale of health insurance to small employers states took measures to restrict insurers ability to distinguish between high and low risk customers because of concern about the low rate of coverage among workers in small firms the high prices in the small group market and the absence of federal health reform using both individual level and employer level data i test predictions about the effect of reforms on the employer provided health insurance market i estimate these effects for small firms and their workers using large firms and their workers in the same states as well as large and small firms and their workers in non reform states as comparison groups i find the reforms decreased the rate of employer coverage on average for workers in small firms by less than two percentage points within small firms low expenditure individuals experienced a larger decline in the rate of coverage through their employer while the coverage rate of high expenditure individuals rose slightly in some specifications there is also evidence that comprehensive reforms increased premiums slightly for small employers and that most of this increase was passed on to workers through higher employee contributions

health and wealth of elderly couples causality tests using dynamic panel data models a positive relationship between socio economic status ses and health the health wealth gradient is repeatedly found in many industrialized countries this study analyzes competing explanations for this gradient causal effects from health to wealth health causation and causal effects from wealth to health wealth or social causation using six biennial waves of couples aged 51 61 in 1992 from the us health and retirement study we test for causality in panel data models incorporating unobserved heterogeneity and a lag structure supported by specification tests in contrast to tests relying on models with only first order lags or without unobserved heterogeneity these tests provide no evidence of causal wealth health effects on the other hand we find strong evidence of causal effects from both spouses health on household wealth we also find an effect of the husband s health on the wife s mental health but no other effects from one spouse s health to health of the other spouse

moral hazard in insurance value based cost sharing and the benefits of blissful ignorance the conventional theory of optimal coinsurance rates for health insurance with moral hazard indicates that coinsurance should vary with the price responsiveness or price elasticity of demand for different medical services an alternative theory called value based cost sharing indicates that coinsurance should be lower for services with higher marginal benefits relative to costs this paper reconciles the two views it shows that if patient demands are based on correct information optimal coinsurance is the same under either theory if patient demands differ from informed demands optimal coinsurance depends both on information imperfection and price responsiveness value based cost sharing can be superior to providing information even if the cost of information is minimal when patient demands fall short of informed demands an extended numerical example illustrates these points

the rise in the disability rolls and the decline in unemployment between 1984 and 2001 the share of nonelderly adults receiving social security disability insurance income di rose by 60 percent to 5 3 million beneficiaries rapid program growth despite improving aggregate health appears to be explained by reduced screening stringency declining demand for less skilled workers and an unforeseen increase in the earnings replacement rate we estimate that the sum of these forces doubled the labor force exit propensity of displaced high school dropouts after 1984 lowering measured u s unemployment by one half a percentage point steady state calculations augur a further 40 percent increase in the rate of di receipt

medical care costs how much welfare loss hardly a week goes by without a front page newspaper article on rising health care costs and the uninsured in this article i focus mainly on costs arguing that the issue has been somewhat misconceived while the level of medical care spending in the u s is a cause for concern the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem in fact cost containment may not be as urgent as is widely supposed and some proposed cost containment policies may result in welfare losses for the insured and even increase the number of uninsured

consumption insurance an evaluation of risk bearing systems in low income economies the hypothesis of full risk sharing can be taken to data from low income countries and evaluate formal and informal financial systems in many contexts idiosyncratic risks are high so credit insurance arrangements could be beneficial statistical tests reveal that households in southern india take advantage of these possibilities villages in cote d ivoire and countries in thailand do not do as well the paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems the full information and mechanism design frameworks provide benchmarks for policy analysis

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

the growth in the social security disability rolls a fiscal crisis unfolding the u s social security disability insurance di program has grown dramatically over the last 20 years in size and expense this growth poses significant risks to the finances of the di program and the broader social security system and raises troubling questions as to whether the program is being misused by claimants this article first provides an overview of the disability insurance program describing who qualifies for the program how an individual applies for benefits and how the level of benefits is determined next we summarize the factors responsible for the growth in the di rolls and discuss how the characteristics of di recipients have changed as a result we then explore the extent of moral hazard in the di program and the effectiveness of the screening process in distinguishing meritorious from nonmeritorious claims finally we identify the challenges that the di program creates for social security finances and social security reform and discuss potential reforms to the di program

fringe benefits and the demand for part time workers in the us tax code nondiscrimination rules and other institutional constraints require employers to offer the same fringe benefits to all full time workers but allow them to deny benefits to part time workers as a result firms that offer generous fringe benefits to higher skill workers have an incentive to hire lower skill workers on a part time or contingent basis this paper uses cross section establishment data to investigate the effect of employer provided fringe benefits on the demand for part time workers the results indicate that firms that offer more generous fringe benefits make greater use of low wage part time workers there is no significant relationship between fringe benefits and the proportion of high wage workers employed part time

health insurance and the consumer bankruptcy decision evidence from expansions of medicaid abstract anecdotal evidence and several observational studies suggest that out of pocket medical costs are pivotal in a large fraction of consumer bankruptcy decisions in this paper we assess the contribution of medical costs to household bankruptcy risk by exploiting plausibly exogenous variation in publicly provided health insurance using cross state variation in medicaid expansions from 1992 to 2004 we find that a 10 percentage point increase in medicaid eligibility reduces personal bankruptcies by 8 with no evidence that business bankruptcies are similarly affected we interpret our findings with a model in which health insurance imperfectly substitutes for other forms of financial protection and we use the model to present simple calibration results which illustrate how our reduced form parameter estimate affects the optimal level of health insurance benefits we conclude with calculations which suggest that out of pocket medical costs are pivotal in roughly 26 of personal bankruptcies among low income households

cross border externalities and trade liberalization the strategic control of pollution the authors examine international trade in a commodity whose production creates a negative externality for the importing country and they consider the nations strategic policy choices when they can restrict trade and when they are bound by a free trade agreement when pollution abatement technology is available the exporting country induces its adoption despite national indifference to the externality in order to reduce the tariff in a free trade agreement environmental policy is used to exploit monopoly power in trade an alternative policy instrument a process standard is introduced national competition in controlling emissions leads to very restrictive antipollution measures we examine international trade in a commodity whose production creates a negative externality for the importing country and we consider the nations strategic policy choices when they can restrict trade and when they are bound by a free trade agreement when pollution abatement technology is available the exporting country induces its adoption despite national indifference to the externality in order to reduce the tariff in a free trade agreement environmental policy is used to exploit monopoly power in trade an alternative policy instrument a process standard is introduced national competition in controlling emissions leads to very restrictive anti pollution measures

the evolution of medical spending risk how has the economic risk of health spending changed over time for u s households we describe trends in aggregate health spending in the united states and how private insurance markets and public insurance programs have changed over time we then present evidence from consumer expenditure survey microdata on how the distribution of household spending on health that is out of pocket payments for medical care plus the household s share of health insurance premiums has changed over time this distribution has shifted up over time households spend more on medical care and insurance than they used to but for the purposes of measuring change in risk it is not the mean but the dispersion of this distribution that is of interest we consider two measures of dispersion that serve as proxies for household risk the standard deviation of the distribution of household health spending and the ratio of the 90th percentile of spending to the median the so called 90 50 gap we find surprisingly that neither has increased despite the rapid rise in aggregate health spending this conclusion holds true for broad subgroups of the population for example the nonelderly as a group but not for some narrowly defined subgroups for example low income families with children we next consider how much risk households should face from the perspective of economic efficiency household risk may not have changed much over the past several decades but do we have any evidence that this level represents either too much or too little risk finally we discuss implications for public policy in particular for current debates over expanding health insurance coverage to the uninsured

international trade in carbon emission rights and basic materials general equilibrium calculations for 2020 restrictions on co emissions affect international trade and the pattern of comparative advantage this paper based on calculations with a static general equilibrium model suggests that international trade in carbon rights is a substitute for trade in energy intensive goods and thus international trading in carbon rights reduces sectoral effects of emission reductions in our model we surprisingly find that free riding by non signatory countries may not render unilateral action ineffective if the oecd unilaterally cuts global emissions by 5 per cent from 1990 levels by the year 2020 emissions by non oecd regions increase but offset less than 15 per cent of this cutback moreover carbon taxes depress international oil prices and create incentives for increased tradc in natural gas

altruism the samaritan s dilemma and government transfer policy this paper shows that altruism provides an efficiency rationale for public provision of insurance to the poor the framework is one in which there are rich altruists and risk averse poor who face some possibility of loss the government represents the rich and makes transfers on their behalf with unconditional transfers the poor may forgo insurance and rely on private charity to bail them out in the event of loss this reliance on private charity has adverse efficiency effects these may be avoided if the government makes in kind transfers of insurance copyright 1995 by american economic association

the aggregate effects of health insurance evidence from the introduction of medicare this paper investigates the effects of market wide changes in health insurance by examining the single largest change in health insurance coverage in american history the introduction of medicare in 1965 i estimate that the impact of medicare on hospital spending is over six times larger than what the evidence from individual level changes in health insurance would have predicted this disproportionately larger effect may arise if market wide changes in demand alter the incentives of hospitals to incur the fixed costs of entering the market or of adopting new practice styles i present some evidence of these types of effects a back of the envelope calculation based on the estimated impact of medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period

health and financial strain evidence from the survey of consumer finances using data from the survey of consumer finances this study examines the relationship between health status and financial strain controlling for the dual endogeneity between the two factors simultaneous two stage probit models are estimated for self reported health status and three measures of financial strain the results from all three models indicate that poor health significantly increases the probability of financial strain there is little evidence that financial strain contributes to poor health the findings suggest that severe health conditions may result in larger financial burdens while large financial burdens are unlikely to accelerate a decline in health status in the end health may be contributing to widening financial disparities especially among the poor who are in poor health

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

option price estimates for water quality improvements a contingent valuation study for the monongahela river abstract we present the findings from a contingent valuation survey designed to estimate the option price bids for the improved recreation resulting from enhanced water quality in the pennsylvania portion of the monongahela river the findings are based on a survey design that used professional interviewers to conduct personal interviews determined from a representative sample of 393 households in addition the research suggests that protest bids and outliers be viewed similarly accordingly a new technique for identifying outlying responses is proposed the findings suggest that the question format affects the option price estimates and that criteria for determining the final sample of responses can have an important influence on contingent valuation results

taxes fringe benefits and faculty the growth of employee benefits in academe has closely paralleled their economy wide growth this study estimates a complete system describing the demand for benefits and wages using panel data on 1477 institutions of higher learning the demand for benefits is very responsive to changes in real income and the tax price of benefits these conclusions are robust with respect to varying definitions of the tax price treating it as endogenous and accounting for unmeasured individual effects on demand simulations suggest that the tax reform act of 1986 sharply reduced the demand for benefits extrapolating the impact to the entire economy the annual flow of compensation shifted away from benefits by at least 15 billion copyright 1992 by mit press

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

workplace compensation practices and the rise in benefit inequality this article aims to explain why inequality in fringe benefits has grown faster than wage inequality over the past four decades we depart from previous income inequality research by studying benef