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

can labor market policies reduce deaths of despair do minimum wages and the earned income tax credit eitc mitigate rising deaths of despair we leverage state variation in these policies over time to estimate event study and difference in differences models of deaths due to drug overdose suicide and alcohol related causes our causal models find no significant effects on drug or alcohol related mortality but do find significant reductions in non drug suicides a 10 percent minimum wage increase reduces non drug suicides among low educated adults by 2 7 percent and the comparable eitc figure is 3 0 percent placebo tests and event study models support our causal research design increasing both policies by 10 percent would likely prevent a combined total of more than 700 suicides each year

longitudinal determinants of end of life wealth inequality abstract inequality in wealth among elderly households and in particular the prevalence of very low wealth holdings can be an important consideration in the design of social insurance programs this paper examines the incidence and determinants of low levels of financial and total wealth using repeated cross sections of the health and retirement study hrs and a small longitudinal sample of hrs respondents observed both at age 65 and shortly before death most of those who report very low wealth holdings at the end of their life had little wealth at the traditional retirement age of 65 there is strong persistence over time in reports of very low wealth and more generally relatively little evidence that wealth is drawn down in the first 15 years of retirement the age specific probability of reporting low wealth increases slowly after age 65 low lifetime earnings are strongly predictive of low wealth at retirement and at the end of life the post retirement onset of a major medical condition and for married women the loss of their spouse are both associated with small increases in the probability of reporting very low wealth but they account for a small fraction of low wealth outcomes low levels of wealth accumulation before age 65 rather than gaps in the safety net after 65 or rapid spend down of accumulated assets appear to be the primary determinant of low levels of wealth just before death

coworker influence on annuitization decisions evidence from defined benefit plans abstract we investigate the role of coworker influence on an individual s annuitization decision using rich data on payout options and decisions in defined benefit plans we find that past payout choices of coworkers significantly affect an employee s decision to annuitize at retirement and that the coworkers payout choices have a larger economic effect on annuitization than recent stock market returns we also find that coworker effects are greater for employees who have a similar level of benefit amounts those who share geographic proximity same zip code and those who retire at a norm modal retirement age of their workplace robustness tests show that estimated coworker effects are unlikely to be driven by unobserved common environments or similar preferences

mortality inequality the good news from a county level approach in this essay we ask whether the distributions of life expectancy and mortality have become generally more unequal as many seem to believe and we report some good news focusing on groups of counties ranked by their poverty rates we show that gains in life expectancy at birth have actually been relatively equally distributed between rich and poor areas analysts who have concluded that inequality in life expectancy is increasing have generally focused on life expectancy at age 40 to 50 this observation suggests that it is important to examine trends in mortality for younger and older ages separately turning to an analysis of age specific mortality rates we show that among adults age 50 and over mortality has declined more quickly in richer areas than in poorer ones resulting in increased inequality in mortality this finding is consistent with previous research on the subject however among children mortality has been falling more quickly in poorer areas with the result that inequality in mortality has fallen substantially over time we also show that there have been stunning declines in mortality rates for african americans between 1990 and 2010 especially for black men finally we offer some hypotheses about causes for the results we see including a discussion of differential smoking patterns by age and socioeconomic status

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

income inequality and health status in the united states evidence from the current population survey several recent studies have identified an association between income inequality and aggregate health outcomes this has been taken to be evidence that inequality is detrimental to individual health we use data from the 1995 99 march current population survey to examine the effect of income inequality on individual health status for both the general population and those individuals in poverty we find no consistent association between income inequality and individual health status our results contradict recent claims that the psychosocial effects of income inequality have dramatic consequences for individual health outcomes

inter vivos transfers and bequests in three oecd countries reforms reducing the generosity of pensions have distributional effects on future generations if individuals care about their descendants welfare but only affect elderly individuals if bequests are the unintentional result of precautionary savings and safety net programmes such as unemployment insurance may displace sources of private help such as that provided by living parents to their children in need this paper provides comparable measures of how expected bequests and transfers vary with cumulated parental earnings in the united states west germany and the united kingdom the strength of bequest motives is empirically very weak in the available data private inter vivos transfers which appear to depend on the recipients economic situation are partly crowded out by public unemployment insurance programmes together involuntary bequests and intentional inter vivos transfers appear to be an important channel of intergenerational inequality transmission and strengthen substantially the relationship between an individual s and his parents economic status ernesto villanueva

determinants of healthcare spending a state level analysis within the high and rising level of healthcare spending for the us as a whole is substantial variation in spending across states yet relatively little attention has been given to the empirical analysis of interstate differences in aggregate healthcare expenditures and therefore little empirical evidence exists at the state level to guide policymakers using data for all 50 states for the year 1998 we estimate an empirical model that includes structural and reduced form healthcare spending equations and a health production function to assess the significance size and relative importance of factors that prior research indicates may play an important role in explaining interstate variation in medical care expenditures and the main pathways through which they operate our results indicate higher levels of healthcare spending for state populations with higher income less education fewer uninsured residents less healthy lifestyles larger proportion of elderly residents greater availability of medical

the dynamics of health in the british household panel survey this paper considers the dynamics of a categorical indicator of self assessed health using eight waves 1991 1998 of the british household panel survey bhps our analysis has three focal points the relative contributions of state dependence and heterogeneity in explaining the dynamics of health the existence and consequences of health related sample attrition and the investigation of the effects of measures of socioeconomic status with a particular focus on educational attainment and income to investigate these issues we use dynamic panel ordered probit models there is clear evidence of health related attrition in the data but this does not distort the estimates of state dependence and of the socioeconomic gradient in health the models show strong positive state dependence and heterogeneity accounts for around 30 of the unexplained variation in health copyright 2004 john wiley sons ltd

impact of international climate policies on co2 capture and storage deployment illustrated in the dutch energy system a greenhouse gas emission trading system is considered an important policy measure for the deployment of ccs at large scale however more insights are needed whether such a trading system leads to a sufficient high co2 price and stable investment environment for ccs deployment to gain more insights we combined worldscan an applied general equilibrium model for global policy analysis and markal nl uu a techno economic energy bottom up model of the dutch power generation sector and co2 intensive industry worldscan results show that in 2020 co2 prices may vary between 20 tco2 in a grand coalition scenario in which all countries accept greenhouse gas targets from 2020 to 47 tco2 in an impasse scenario in which eu 27 continues its one sided emission trading system without the possibility to use the clean development mechanism markal nl uu model results show that an emission trading system in combination with uncertainty does not advance the application of ccs in an early stage the rates at which different co2 abatement technologies including ccs develop are less crucial for introduction of ccs than the co2 price development and the combination of biomass co firing and ccs seems an important option to realise deep co2 emission reductions

uncertain medical expenses and precautionary saving near the end of the life cycle this paper introduces a dynamic structural model of household consumption decisions in which elderly families consider the effects of uncertain future medical expenses when deciding current levels of consumption the model with uncertain medical expenses implies a potentially important role for precautionary saving incentives to explain slow rates of dissaving among elderly americans during retirement rather than just simulating the stochastic dynamic model preference parameters are estimated using panel data on health wealth and expenditures for retired families the health uncertainty model predicts consumption levels closer to observed expenditures than a life cycle model with uncertain longevity however elderly families typically dissave their financial assets more slowly than even the baseline health uncertainty model predicts is optimal

corporate issues of foreign currency exchange warrants a case study of financial innovation and risk management abstract we argue that hedging and risk management activities of modern corporations arise as a direct consequence of attempts to create shareholder wealth through financial innovation we formalize this argument by examining in detail corporate issues of foreign currency exchange warrants we then focus on one multiple issuer to demonstrate how the foreign exchange risk created by the sale of the warrants can be eliminated the use of off balance sheet risk management techniques to lock in the benefits of selling overpriced securities raises questions about the information content of innovative corporate financing decisions

institutional markets financial marketing and financial innovation firms and institutions are monitored and controlled through a complex set of implicit and explicit contractual relations because of these agency theoretic relations institu tional behavior in financial markets is not a simple reflection of the preference structures of individuals institutional preferences give rise to a demand for new financial instru ments and innovations even when the returns on these instruments are spanned in the sense of complete pricing the innovations can be thought of as solving moral hazard problems an agency theoretic example serves to illustrate the demand supply and financial marketing of stripped securities in short institutions matter the past two decades have witnessed an explosion of financial innovations the changes are too varied and diffuse to permit an easy taxonomy but broadly they seem to fall into two classes first there are the new securities and their markets beginning with puts and calls we have moved on to euromarkets mortgage pass throughs and cmo s strips straps and swaps putable converti bles primes and scores and s p futures and all of the other instruments that inhibit the financial zoo second there are the dynamic trading strategies that make heavy use of the new instruments basket and program trading the asset pricing theories that now characterize different types of money management and the various incarnations of portfolio insurance have changed financial decision making as dramatically as the available array of instruments has changed along with these changes has come an enormous increase in the demand for the services of financial economists we are called upon not only to value the new instruments and the new strategies but to design them as well like engineers

income related inequality in life years and quality adjusted life years abstract we estimate the income related inequality in sweden with respect to life years and quality adjusted life years qalys we use a large data set from sweden with over 40 000 individuals followed up for 10 16 years to estimate the survival and quality adjusted survival in different income groups for both life years and qalys we discover inequalities in health favouring the higher income groups for men women in the youngest age group 20 29 years the number of qalys is 43 7 45 7 in the lowest income decile and 47 2 49 0 in the highest income decile

the effect of pensions on longevity evidence from union army veterans this study uses changes in pension laws for union army veterans as a natural experiment to estimate the causal effect of pensions on longevity and to examine potential pathways underlying such a relationship we examine the effects of the pension laws of 1907 and 1912 which granted old age pensions to union army veterans life expectancy for veterans who received such a pension increased by 0 5 years and 2 7 years respectively the effect of veteran pensions on longevity was large across wealth groups and size of city pensions reduced mortality for both acute and non acute causes of death

the interactive effects of human capital and quality of life on economic growth abstractto bridge the gap in the quality of life qol and economic growth literature and understand the reinforcing effects of qol and human capital on economic development we examine the interactive effects of these two factors on wage growth from 2000 to 2007 at the county level across the united states first a rosen roback model is employed to estimate implicit values of amenities including climate clean air and other natural attributes which are used to generate qol indices second qol human capital represented by the share of college graduates and their interaction serve as key variables in the wage growth model an instrumental variable approach and location fixed effects are used to address endogeneity of human capital and control for location specific unobservable characteristics results suggest that human capital and qol significantly contribute to economic growth and the growth effects are even larger in nonmetropolitan counties importantly we find that the effect of human capital on

the determinants of mortality mortality rates have fallen dramatically over time starting in a few countries in the 18th century and continuing to fall today in just the past century life expectancy has increased by over 30 years at the same time mortality rates remain much higher in poor countries with a difference in life expectancy between rich and poor countries of also about 30 years this difference persists despite the remarkable progress in health improvement in the last half century at least until the hiv aids pandemic in both the time series and the cross section data there is a strong correlation between income per capita and mortality rates a correlation that also exists within countries where richer better educated people live longer we review the determinants of these patterns over history over countries and across groups within countries while there is no consensus about the causal mechanisms we tentatively identify the application of scientific advance and technical progress some of which is induced by income and facilitated by education as the ultimate determinant of health such an explanation allows a consistent interpretation of the historical cross country and within country evidence we downplay direct causal mechanisms running from income to health

cognitive abilities and portfolio choice we study the relation between cognitive abilities and stockholding using the recent survey of health ageing and retirement in europe share which has detailed data on wealth and portfolio composition of individuals aged 50 in 11 european countries and three indicators of cognitive abilities mathematical verbal fluency and recall skills we find that the propensity to invest in stocks is strongly associated with cognitive abilities for both direct stock market participation and indirect participation through mutual funds and retirement accounts since the decision to invest in less information intensive assets such as bonds is less strongly related to cognitive abilities we conclude that the association between cognitive abilities and stockholding is driven by information constraints rather than by features of preferences or psychological traits

the insurance value of medical innovation abstract economists think of medical innovation as a valuable but risky good producing health benefits but increasing financial risk for consumers and healthcare payers this perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease we present an alternative framework that accounts for all these sources of value and links them to the value of healthcare insurance we show that any innovation worth buying reduces overall risk and generates positive insurance value on its own we conduct a stylized numerical exercise to assess the potential empirical significance of our insights our calculations suggest that conventional methods meaningfully understate the value of historical health gains and disproportionately undervalue treatments for the most severe illnesses where physical risk to consumers is the costliest these calculations also suggest that the value of physical insurance from new technologies may exceed the financial spending risk that they pose

hybrid modelling of long term carbon reduction scenarios for the uk this paper summarizes the development of a new hybrid markal macro m m energy system model for the uk this hybrid model maintains the technological and sectoral detail of a bottom up optimisation approach with aggregated energy demand endogeneity and gdp impacts from a single sector neoclassical growth model the uk m m model was developed for underpinning analysis of the uk s groundbreaking mandatory long term 60 carbon dioxide co2 emissions reduction target hybrid modelling illustrates that long term uk co2 emission reductions are feasible however there are endemic uncertainties notably a trade off between behavioural and technological decarbonisation options with resultant energy system impacts in the requirements for zero carbon electricity uk m m model sensitivity runs further illustrate the range of energy system interactions including the deployment of the uk s limited co2 storage capacity alternate timing of power vs transport sectoral reductions the relative ease of switching between electricity generation portfolios and substitution opportunities between natural gas and coal the macro economic cost impacts range from 0 3 to 1 5 reduction in uk gdp by 2050 with higher cost estimates strongly influenced by pessimistic assessments of future low carbon technologies however cost impacts from the uk m m model are likely to be in the lower range for stringent co2 reduction pathways as the simplicity of the reduced form macro linkage omits competitiveness and transitional impacts on the uk economy c 2008 elsevier b v all rights reserved

socioeconomic status and child health why is the relationship stronger for older children case lubotsky and paxson 2001 show that the well known relationship between socio economic status ses and health exists in childhood and grows more pronounced with age however in cross sectional data it is difficult to distinguish between two possible explanations the first is that low ses children are less able to respond to a given health shock the second is that low ses children experience more shocks we show using panel data on canadian children that 1 the gradient we estimate in the cross section is very similar to that estimated previously using u s children 2 both high and low ses children recover from past health shocks to about the same degree and 3 that the relationship between ses and health grows stronger over time mainly because low ses children receive more negative health shocks in addition we examine the effect of health shocks on math and reading scores we find that health shocks affect test scores and future health in very similar ways our results suggest that public policy aimed at reducing ses related health differentials in children should focus on reducing the incidence of health shocks as well as on reducing disparities in access to palliative care

technology detail in a multisector cge model transport under climate policy a set of three analytical models is used to study the imbedding of specific transport technologies within a multisector multiregion evaluation of constraints on greenhouse emissions the key parameters of a computable general equilibrium cge model are set to mimic the behavior of a model of modal splits and a market allocation markal model of household and industry transport activities in simulation mode the cge model provides key economic data to an analysis of the details of transport technology under policy restraint results focus on the penetration of new automobile technologies into the vehicle market

worker absence and productivity evidence from teaching a significant amount of work time is lost each year due to worker absence but evidence on the productivity losses from absenteeism remains scant due to difficulties with identification we use uniquely detailed data on the timing duration and cause of absences among teachers to address many of the potential biases from the endogeneity of worker absence our analysis indicates that worker absences have large negative impacts the expected loss in daily productivity from employing a temporary substitute is on par with replacing a regular worker of average productivity with one at the 10th 20th percentile of productivity

low emissions development pathways of the macedonian energy sector abstract in this paper markal integrated energy system model is applied to explore the impacts and opportunities for low emissions energy system development in macedonia identifying co2 emission reduction policies and the cost of taking action two scenarios with different reduction target have been examined higher ambition scenario where emissions are restricted to 10 above 1990 levels in 2021 and 2 5 in 2030 and moderate ambition scenario where emissions are restricted to 25 above 1990 levels in 2021 and 15 in 2030 in order to provide insights into the optimal timing of emission reductions both of these cases have also been run under cumulative constraints that is rather than having the specified annual targets there is a carbon budget set for 2015 2030 44 mt and 26 mt for higher and moderate ambition cases respectively reflecting the same ambition as the above cases but providing flexibility to reduce emissions in the most cost optimal way the results show that most of the co2 reductions are in the power generation sector which is not surprising as this tends to be the most carbon intensive sector the higher ambition case is considerably more expensive than the reference case with costs 1 9 higher while the increase under the moderate ambition case is 1 under a cumulative constraint the additional costs are reduced to 1 5 and 0 6 respectively highlighting the importance of the timing of action

mortality health status and wealth in this paper we use the two waves of the british retirement survey 1988 1989 and 1994 to quantify the relationship between socioeconomic status and health outcomes we find that even after conditioning on the initial health status wealth rankings are important determinants of mortality and the evolution of the health indicator in the survey for men aged 65 moving from the 40th percentile to the 60th percentile in the wealth distribution increases the probability of survival by between 1 0 and 1 9 percentage points depending on the measure of wealth used a similar effect is found for women of between 1 1 and 1 3 percentage points in the process of estimating these effects we control for nonrandom attrition from our sample

the pricing of dollar denominated yen dm warrants abstract this paper investigates the pricing of dollar denominated cross currency warrants options traded in us markets in a black scholes setting we obtain closed form option pricing formulas for european warrants we describe the intuition behind the differences in the properties of these securities versus standard foreign currency options concentrating on parameter sensitivity as well as hedging aspects we show that us cross currency warrants can be hedged using three underlying assets although the fundamental pde involves only one asset this analytical framework is applied to observed prices for at t s nyse traded us yen dm cross currency warrant we examine and attempt to explain the deviations between model and observed prices uncovered by the empirical work we find evidence of misspecification in standard currency option pricing models jel f31

providing adequate economic incentives for bioenergies with co2 capture and geological storage abstract knowing that carbon capture and storage ccs could play an important role in reducing emissions it is important to have a good understanding of this role and the importance of environmental policies to support carbon capture and geological storage from bioenergies beccs to date ccs technologies are not deployed on a commercial level and policy instruments should be used to provide incentives to firms to use these technologies to reduce pollution the aim of this paper is to compare the cost efficiency of several incentive based instruments a fossil fuel tax an emissions tax a cap and trade system and a subsidy on captured emissions needed to spur the adoption of ccs and beccs using a dynamic general equilibrium model this type of model has become the standard for assessing economy wide impacts of environmental and technological policies the study shows that beccs will be deployed only if a specific subsidy per unit of biomass emissions captured with a ccs technology is available we show also that the two most cost efficient instruments for achieving a given emissions reduction target are a specific subsidy that rewards captured emissions and a carbon tax whose revenues are recycled to subsidize beccs

a median voter model of health insurance with ex post moral hazard abstract one of the main features of health insurance is moral hazard as defined by pauly pauly m v 1968 the economics of moral hazard comment american economic review 58 531 537 people face incentives for excess utilization of medical care since they do not pay the full marginal cost for provision to mitigate the moral hazard problem a coinsurance can be included in the insurance contract but health insurance is often publicly provided having a uniform coinsurance rate determined in a political process is quite different from having different rates varying in accordance with one s preferences as is possible with private insurance we construct a political economy model in order to characterize the political equilibrium and answer questions like under what conditions is there a conflict in society on what coinsurance rate should be set and which groups of individuals will vote for a higher and lower than equilibrium coinsurance rate respectively we also extend our basic model and allow people to supplement the coverage provided by the government with private insurance then we answer two questions who will buy the additional coverage and how do the coinsurance rates people are now faced with compare with the rates chosen with pure private provision

combining bottom up and top down abstract we motivate the formulation of market equilibrium as a mixed complementarity problem which explicitly represents weak inequalities and complementarity between decision variables and equilibrium conditions the complementarity format permits an energy economy model to combine technological detail of a bottom up energy system with a second best characterization of the over all economy our primary objective is pedagogic we first lay out the complementarity features of economic equilibrium and demonstrate how we can integrate bottom up activity analysis into a top down representation of the broader economy we then provide a stylized numerical example of an integrated model within both static and dynamic settings finally we present illustrative applications to three themes figuring prominently on the energy policy agenda of many industrialized countries nuclear phase out green quotas and environmental tax reforms

average earnings and long term mortality evidence from administrative data in this paper we exploit a unique database that merges longitudinal earnings data on pennsylvanian workers with national death records to study the detailed nature of the corre lation between earnings and mortality we find that the estimates typically reported in the lit erature which are based on single years of earn ings data are likely to understate substantially the strength of the association between income and mortality in particular relative to a single year of earnings the average of earnings over a six year period predicts a 70 percent greater impact of income on mortality in addition con trolling for the mean level of earnings over a period we find that greater earnings volatility is associated with higher mortality we also examine the lag structure of the rela tionship between earnings and mortality we

declining mortality inequality within cities during the health transition in the united states in the late 19th and early 20th century large cities had extremely high death rates from infectious disease within major cities such as new york city and philadelphia there was significant variation at any point in time in the mortality rate across neighborhoods between 1900 and 1930 neighborhood mortality convergence took place in new york city and philadelphia we document these trends and discuss their consequences for neighborhood quality of life dynamics and the economic incidence of who gains from effective public health interventions

socioeconomic inequality of access to healthcare does choice explain the gradient equity of access is a key policy objective in publicly funded healthcare systems however observed inequalities of access by socioeconomic status may result from differences in patients choices using data on non emergency coronary revascularisation procedures in the english national health service we found substantive differences in waiting times within public hospitals between patients with different socioeconomic status up to 35 difference or 43 days between the most and least deprived population quintile groups using selection models with differential distances as identification variables we estimated that only up to 12 of these waiting time inequalities can be attributed to patients choices of hospital and type of treatment heart bypass versus stent residual inequality after allowing for choice was economically significant patients in the least deprived quintile group benefited from shorter waiting times and the associated health benefits were worth up to 850 per person

sewers diffusion and the decline of mortality the case of paris 1880 1914 it is common to argue that water infrastructure innovations improve life expectancy yet the benefits of clean water depend on a mechanism to dispose of waste water we draw on the historical experience of a large industrial city to estimate the impact of the spread of the sewer system using a longitudinal data set on mortality and rents for each of paris 80 neighborhoods we show that sanitation contributed several years to life expectancy these results point out the multiplicity of infrastructure needed to help decrease mortality

financial innovation the last twenty years and the next the word revolution is entirely appropriate for describing the changes in financial institu tions and instruments that have occurred in the past twenty years the major impulses to successful financial innovations have come from regulations and taxes the outlook for the future is for a slowing down of the rate of financial innovation but much growth and improvement are still in prospect

causal effects of health shocks on consumption and debt quasi experimental evidence from bus accident injuries abstract endogeneity between health and wealth presents a challenge for estimating causal effects of health shocks using a quasi experimental design comprising exogenous shocks sustained as bus accident injuries in india with controls drawn from travelers on the same bus routes one year later i present new evidence of causal effects on consumption and debt using primary household survey data i find that households faced with shock related expenditures are able to smooth consumption on food housing and festivals with small reductions in educational spending debt was the principal mitigating mechanism households used leading to significantly larger levels of indebtedness

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

dynamic formulation of a top down and bottom up merging energy policy model abstract the impact of energy policy measures is not restricted to the energy system and should therefore be analysed within an economy wide framework while keeping the essential details of the energy sector the aim of this paper is to present new developments in the field of the consistent evaluation of indicators for the sustainability assessment of energy policy measures starting from the static concept of bohringer energy econ 20 1998 233 this paper shows how the complementarity format can be used in computable general equilibrium cge modelling for a dynamic formulation of bottom up and top down approach merging models while a hybrid approach increases the credibility of cge models in energy policy analysis by replacing the energy sector generic functional forms with a bottom up activity analysis based on specific technologies the endogenous formulation of investment decisions makes an explicit description of evolving specific capital stocks and technology mixes possible both features are essential when assessing effects of policy measures that may be affected by structural change which is typically the case in the long term assessment of energy policy measures

long run impacts of childhood access to the safety net a growing economics literature establishes a causal link between in utero shocks and health and human capital in adulthood most studies rely on extreme negative shocks such as famine and pandemics we are the first to examine the impact of a positive and policy driven change in economic resources available in utero and during childhood in particular we focus on the introduction of a key element of the u s safety net the food stamp program which was rolled out across counties in the u s between 1961 and 1975 we use the panel study of income dynamics to assemble unique data linking family background and county of residence in early childhood to adult health and economic outcomes the identification comes from variation across counties and over birth cohorts in availability of the food stamp program our findings indicate that the food stamp program has effects decades after initial exposure specifically access to food stamps in childhood leads to a significant reduction in the incidence of metabolic syndrome obesity high blood pressure and diabetes and for women an increase in economic self sufficiency overall our results suggest substantial internal and external benefits of the safety net that have not previously been quantified

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

inequality aversion in income health and income related health abstract based on a survey of a sample of the general public we estimate inequality aversion across income health and bivariate income health inequality aversion is domain specific mean inequality aversion is greater for income than for health but the underlying distributions of aversion attitudes differ with a highly bi modal distribution of inequality aversion values for health in which nearly half the participants display very low aversion and nearly half display very high aversion aversion to income related health inequality is greater than that to income or health alone consistent with previous literature we find only weak associations between aversion attitudes and individual characteristics the magnitude of the estimates implies potentially large gains in welfare from reducing inequality in these domains

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

the pricing of call and put options on foreign exchange this paper derives pricing equations for european puts and calls on foreign exchange the call and put pricing formulas are unlike the black scholes equations for stock options in that there are two relevant interest rates interest rates are stochastic and boundary constraints differ in addition it is shown that both american call and put options have values larger than their european counterparts

the pricing of options with default risk this paper considers the pricing of options with default risk the comparative statics of such options can differ from those of ordinary options and early exercise of such american call options can be optimal several examples of options with default risk are considered traditionally it has been assumed that options have no default risk such an assumption is reasonable when one studies options traded on an organized exchange in the u s default on such options would require as cox and rubinstein 5 put it a very sudden and strong movement in stock prices one considerably more extreme than any on record p 71 however many options and financial assets containing option like payoffs are sold by firms that have limited assets for such options default is often a possibility that must be taken seriously in this paper we study how options subject to default risk which we hereinafter call vulnerable options are priced it turns out that many of the well established results of the option pricing literature see e g smith 12 and references therein do not hold for vulnerable options in particular the value of a vulnerable european option can fall with time to maturity with the interest rate and with the variance of the underlying asset furthermore it may pay to exercise early a vulnerable american option on a non dividend paying asset

uncertain health and survival effects on end of life consumption this article analyzes the impact of health and survival uncertainty on the saving and consumption decisions of retirees a dynamic programming approach is used to model the household s planning problem the utility parameters are estimated using panel data we find that a fall into poor health raises the marginal utility from consumption simulations are used to indicate the effects of falling into poor health and loss of spouse they reveal a large transfer from the healthy to the sick partner and a strong dependence of saving on the survivor benefits suggesting that concern about the surviving spouse is an important motive for saving

income productivity in china on the role of health this study provides empirical evidence regarding the income productivity of health human capital in china we appeal to concepts from human capital theory to support a basic model that treats health as a form of human capital in the income production process our model examines the economic return at the household level from the health of its individual members we estimate this with a longitudinal sample drawn from the china health and nutrition survey chns allowing us to exploit within variation in health and income to address possible unobservables biasing estimates of the impact of health on income in the simple cross sectional setting household income is strongly influenced by the health of its members particularly in rural areas these findings could have important implications for health and economic policy making aimed at reducing the long standing urban rural economic gap and more comprehensively insuring the rural population against health and economic risk

does head start improve children s life chances evidence from a regression discontinuity design this paper exploits a new source of variation in head start funding to identify the program s effects on health and schooling in 1965 the office of economic opportunity oeo provided technical assistance to the 300 poorest counties to develop head start proposals the result was a large and lasting discontinuity in head start funding rates at the oeo cutoff for grant writing assistance we find evidence of a large drop at the oeo cutoff in mortality rates for children from causes that could be affected by head start as well as suggestive evidence for a positive effect on educational attainment i introduction head start was established in 1965 as part of the war on poverty to provide preschool health and other social services to poor children age three to five and their families and currently serves over 900 000 children each year at a cost of around 7 billion hhs 2006 this paper provides new evidence on the effects of the head start program on schooling and health by drawing on a new source of variation in program funding spe

estimating equilibrium models of sorting across locations while there is growing interest in measuring the size and scope of local spillovers it is well understood that such spillovers cannot be distinguished from unobservable local attributes using solely the observed location decisions of individuals or firms we propose an empirical strategy for recovering estimates of spillovers in the presence of unobserved local attributes for a broadly applicable class of equilibrium sorting models our approach relies on an iv strategy derived from the internal logic of the sorting model itself we show practically how the strategy is implemented provide intuition for our instruments discuss the role of effective choice set variation in identifying the model and carry out a series of monte carlo simulations to demonstrate performance in small samples

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

inheritances intergenerational transfers and the accumulation of health research on inheritances has largely focused on the motives of the bequeathing regardless of the motivations of the giving generation prior to death wealth is transferred and this additional money may have an impact on the receiving generation in particular inheritances may be correlated with individuals health for several reasons first there may be a causal effect inheritances provide additional financial resources allowing recipients to purchase inputs to health and health care a large literature on socioeconomic status ses and health investigates the effect of financial resources on health second inheritances may signal the overall strength of a dynasty this dynastic strength would manifest itself in both better health and more ability to leave a bequest inheritances could be associated with better health because parents who will eventually bequeath wealth to their children may have disproportionately higher ses which improves the health outcomes of the children third bequests and a bequest motive may signal a stronger interest in one s child this reminder to the child could improve his emotional well being this paper

discrete time valuation of american options with stochastic interest rates we develop an arbitrage free discrete time model to price american style claims for which domestic term structure risk foreign term structure risk and currency risk are important this model combines a discrete version of the heath jarrow and morton 1992 term structure model with the binomial model of cox ross and rubinstein 1979 it converges weakly to the continuous time models in amin and jarrow 1991 1992 the general model is path dependent and can be implemented with arbitrary volatility functions to value claims with maturity up to five years the model is illustrated with applications to long dated american currency warrants and a cross rate swap from the quanto class article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance