what have we learned from the illinois reemployment bonus experiment this article analyzes an experimental program that offered payments to unemployment insurance ui recipients who found a job quickly the experiment provided exogenous differences in individual incentives which i use to test labor supply and search theories of unemployment i examine predictions about the timing of exits from unemployment and the effect of the fixed amount bonus on different wage level groups i also argue that the experimental evidence does not show the desirability of a permanent program a permanent program would sharply increase the compensation for short ui spells likely increasing the claims rate and possibly increasing unemployment

how does health insurance affect workers compensation filing i introduction workers compensation serves as a near universal health insurance system for workers who become sick or injured because of their job almost every private sector worker in the united states is covered by workers compensation which typically provides full reimbursement for medical expenditures and partial reimbursement for wage losses incurred as a result of a workplace injury or illness 1 given that employer provided health insurance usually involves cost sharing for medical expenditures and offers no income replacement one would expect workers to seek compensation for nearly all workplace health conditions however it appears that many injured workers elect not to participate in workers compensation using data from a survey of workers in michigan biddle and roberts 2003 found that just 55 1 of the workers with lost time reported filing for any workers compensation benefits and just 39 1 reported filing for wage replacement this suggests that workers may not view workers compensation filing as free for example workers might lack information about the availability or even the existence of workers compensation benefits employers might discourage participation and there could be a stigma associated with filing for benefits additionally a worker might be uncertain about his or her ability to prove that an injury or an illness is work related as a result pursuing a workers compensation claim could require that a worker spend money on healthcare consultations upfront with uncertain prospects for reimbursement while any of these costs could lead a worker not to file a claim the magnitude of nonparticipation is still surprising the existence of alternatives to workers compensation specifically health insurance is often thought to exacerbate nonparticipation injured workers may be unwilling to bear workers compensation filing costs if their health insurance reduces or eliminates the burden of medical costs moreover individuals without health insurance have greater incentive to pass off nonoccupational injuries or illnesses as work related if the possession of health insurance explained nonparticipation there would be fewer normative concerns that poor participation imperils the health of injured workers however a look at data on health insurance and workers compensation filing from the national longitudinal survey of youth nlsy reported in table 1 calls the conventional wisdom into question the first two columns of the table show that injured workers without health insurance are 7 percentage points about 13 less likely to file a claim than those with health coverage 2 this is in spite of the fact that uninsured workers are more likely to have lost wages and missed more days of work as a result of their injuries this result is puzzling given the argument above that the uninsured worker should be more likely to file the last two columns of the table add nuance to this picture showing that the gap in filing widens substantially when we compare workers in firms that do and do not offer health insurance workers in insuring firms are 16 percentage points more likely to file a claim even though their injuries are still less severe in terms of lost wages and work time it would appear that the effects of health insurance on workers compensation claiming are not as straightforward as they might appear and may have more to do with the characteristics of employers who offer health insurance than with the incentives faced by the workers this table illustrates a result that we confirm in this study actual health insurance coverage itself is much less important than whether an employer offers health insurance we found that injured workers are more likely to file claims when they work for an employer who offers health insurance this result holds even when we incorporate worker fixed effects and other control variables suggesting that the characteristics of the employer are not simply proxies for unobserved worker characteristics

do employees sickness absences react to a change in costs for firms evidence from a natural experiment we analyse the impact of a social security reform that changed the costs incurred by firms due to sickness absences the reform abolished a compulsory insurance for firms which insured them against the wages paid to sick blue collar workers during the first year after its introduction we estimate that the reform resulted in about 6 3 percent fewer sickness absences and in about 8 6 percent fewer absence days we do not find evidence for changes in hiring or firing and we find only limited workforce composition changes we do not find spillover effects on the absences of white collar workers robustness checks confirm these results

labor unemployment risk and corporate financing decisions this paper examines the impact of labor unemployment risk on corporate financing decisions theory suggests that firms choose conservative financial policies partly as a means of mitigating worker exposure to unemployment risk using changes in state unemployment insurance benefit laws as a source of variation in the costs borne by workers during layoff spells we explore the connection between unemployment risk and the corporate financing decisions of public firms in the united states we find that increases in legally mandated unemployment benefits lead to increases in corporate leverage the impact of reduced unemployment risk on financial policy is especially strong for firms that have greater layoff separation rates labor intensity and financing constraints the estimated premium required to compensate workers for unemployment risk due to financial distress is about 57 basis points of firm value for a bbb rated firm these findings suggest that labor market frictions have a significant impact on corporate financing decisions

extended benefits and the duration of ui spells evidence from the new jersey extended benefit program abstract this paper examines the impact on the duration of unemployment insurance receipt of a politically motivated program that offered 13 weeks of extended benefits for 6 months in 1996 using state level data and individual administrative records from before during and after the program we find that it raised the fraction of claimants who exhausted their regular benefits by 1 3 percentage points had the program run long enough to affect claimants from the first day of their spell the fraction exhausting would have risen by 7 percentage points and the average recipient would have collected regular benefits for one extra week

measurement error in models of welfare participation we consider the problem of modeling welfare participation when measurement error may affect simulated welfare entitlement we identify a flaw in past implementations of the ml approach and develop a more appropriate ml approach a model of welfare participation is estimated for british pensioners linking the probability of participation to the value of benefit entitlement incorporating the nonlinear rule relating entitlement to the household s income and financial assets the model is used to evaluate the claim costs incurred by participants when we allow for measurement errors in income and assets estimated claim costs are substantially reduced

household balance sheet channels of monetary policy a back of the envelope calculation for the euro area abstract this paper formulates a back of the envelope approach to study the effects of monetary policy on household consumption expenditures we analyze several transmission mechanisms operating through direct partial equilibrium channels intertemporal substitution and net interest rate exposure and indirect general equilibrium channels net nominal exposure as well as wealth collateral and labor income channels the strength of these forces varies across households depending on their marginal propensities to consume their balance sheet composition the sensitivity of their own earnings to fluctuations in aggregate labor income and the responsiveness of aggregate earnings asset prices and inflation to monetary policy shocks we quantify all these channels in the euro area by combining micro data from the hfcs and the eu lfs with structural vars estimated on aggregate time series we find that the indirect labor income channel and the housing wealth effect are strong drivers of the aggregate consumption response to monetary policy and explain the cross country heterogeneity in these responses

the cyclicality of the opportunity cost of employment the flow opportunity cost of moving from unemployment to employment consists of forgone public benefits and the forgone consumption value of nonworking time we construct a time series of the opportunity cost of employment using detailed microdata and administrative or national accounts data to estimate benefits levels eligibility take up consumption by labor force status hours taxes and preference parameters the opportunity cost is procyclical and volatile over the business cycle the estimated cyclicality implies far less unemployment volatility in leading models of the labor market than that observed in the data irrespective of the level of the opportunity cost

the impact of the potential duration of unemployment benefits on the duration of unemployment abstract this paper examines the impact of the potential duration of unemployment insurance ui benefits on unemployment in the united states first we use a large sample of household heads to examine differences in the unemployment spell distributions of ui recipients and nonrecipients sharp increases in the escape rate from unemployment both through recalls and new job acceptances are apparent for ui recipients around the time of benefits exhaustion such increases are not apparent at similar points of spell duration for nonrecipients second our analysis of accurate administrative data from 12 states indicates that a one week increase in potential benefit duration increases the average duration of the unemployment spells of ui recipients by 0 16 to 0 20 weeks

the welfare cost of means testing pensioner participation in income support we estimate parametric and semi parametric binary choice models of benefit take up by british pensioners and use a revealed preference argument to infer the cash equivalent value of disutility arising from stigma or complexity of the claims process these implicit costs turn out to be relatively small averaging about 3 4 per week across income support recipients using the foster greer thorbecke measure of poverty among pensioners we find that allowing for implicit claim costs incurred by benefit recipients raises the measured degree of poverty by not more than 13 copyright 2007 john wiley sons ltd

the impact of unemployment insurance benefit levels on recipiency this article studies the effect of unemployment insurance benefit levels on recipiency increasing benefit levels as measured by the fraction of weekly earnings of the lost job that they replace is found to significantly increase the probability of unemployment insurance recipiency among the eligible there is some evidence however that the effect is smaller at high replacement rates cost increases resulting from take up responses are found to be substantial for increases in the state s maximum benefit amount and for increases in the weekly benefit amount in low replacement rate states

measuring the influence of unemployment insurance on unemployment experiences this article investigates the comprehensive effects of unemployment insurance ui policies on the amount of time and unemployment that individuals report between jobs the econometric model jointly determines the effects of ui on the lengths of nonemployment spells the classification of these spells as unemployment and the likelihood of collecting program benefits the model carefully attempts to isolate variation in ui benefits attributable to differences in generosity across programs to avoid biases in estimating policy effects induced by other contaminating sources of benefit variation using data on men from the national longitudinal survey of youth the empirical results find a ui recipients typically experience longer spells between jobs at least up to the exhaustion of ui benefits and report substantially larger fractions of these spells as unemployment b weekly benefit amounts exert no significant influence on the likelihood of ui recipiency on the length of spells between jobs or on t

california s 2004 workers compensation reform costs claims and contingent workers the large excess fraction of difficult to diagnose injuries that occur on a monday was originally thought to reflect employees use of workers compensation to cover weekend injuries evidence has

revisiting incentive effects in workers compensation do higher benefits really induce more claims an important question to ask regarding social insurance programs such as workers compensation wc is to what extent do higher benefits lead to more claims the authors of this study revisit incentive effects of wc using 25 years of data 1977 2004 from the march current population survey cps to estimate the relationship between wc cash benefit levels and the frequency of wc receipt providing new evidence on the subject they demonstrate that conclusions regarding workers incentives to claim benefits differ dramatically depending upon how one controls for the confounding influence of an individual s past earnings the authors expanded empirical specifications which include flexible earnings controls yield benefit participation elasticities smaller than 0 1 their findings suggest that wc claims are not particularly responsive to changes in benefit levels and that labor supply disincentives may warrant less concern than economists or policymakers have typically exhibited the authors also find th

worker betas five facts about systematic earnings risk abstract the magnitude of and heterogeneity in systematic earnings risk has important implications for various theories in macro labor and financial economics using administrative data we document how the aggregate risk exposure of individual earnings to gdp and stock returns varies across gender age the worker s earnings level and industry aggregate risk exposure is u shaped with respect to the earnings level in the middle of the earnings distribution aggregate risk exposure is higher for males younger workers and construction and durable manufacturing at the top of the earnings distribution aggregate risk exposure is higher for older workers and finance

an investigation of the rationality of consumer valuations of multiple health risks after developing a conceptual analysis of consumer valuation of multiple risks we explore both economic and cognitive hypotheses regarding individual risk taking using a sample of over 1 500 consumers our study ascertains risk dollar tradeoffs for the risks associated with using an insecticide and a toilet bowl cleaner we observe the expected positive valuation of risk reductions and find empirical support for a diminishing in the valuation of risk reduction as the extent of the risk reduction increases we also find evidence of certainty premiums for the total elimination of one risk but no strong evidence of additional certainty premiums for the elimination of multiple risks strong reference risk effects are evident as increases in risk were valued much more greatly than were decreases

workers compensation and consumption smoothing abstract this paper investigates the consumption smoothing benefits of state workers compensation wc programs these programs are among the largest and most controversial forms of social insurance with the putative purpose of supporting families affected by unexpected income shocks due to workplace injuries and illnesses using health and retirement study hrs data for a sample of workers who have experienced a work related work limiting disability i find that a 10 increase in wc benefit generosity offsets the drop in household consumption upon injury by 3 to 5 moreover my estimates imply that if benefits were very low the drop in consumption upon injury would be in the range of 30 a model adapted from the literature on optimal social insurance yields a formula for the optimal level of wc benefits which depends on empirical estimates of the consumption smoothing parameter my calculations suggest that current wc benefit levels are somewhat higher than optimal

the effect of unions on the receipt of unemployment insurance benefits using national longitudinal survey of youth data for 1979 91 the authors analyze the effect of union representation on the likelihood that individuals eligible for unemployment insurance ui bene

the long term effects of unemployment insurance evidence from new brunswick and maine 1940 1991 using data spanning half a century for adjacent jurisdictions in the united states and canada the authors study the long term effects of a generous unemployment insurance ui program on the distribution of weeks worked they find substantial effects for example in 1990 about 12 6 of working age men in maine s northernmost counties worked between 1 and 39 weeks just across the border in new brunswick the figure was 25 6 according to the estimates new brunswick s much more generous ui system accounts for more than three fourths of this differential in part because part year workers are drawn from both ends of the distribution of annual weeks worked 0 weeks and 40 52 weeks the generosity of new brunswick s program had only modest estimated effects on total labor supply even as it substantially increased ui program participation and expenditures

unemployed but optimistic optimal insurance design with biased beliefs biased perceptions of risks change the perceived value of insurance and the per ceived returns to avoiding these risks i show empirically that unemployed workers overestimate how quickly they will nd work but underestimate the return to their search eorts i analyze the consequences for the optimal design of unemployment insurance with biased beliefs contracts equalizing the marginal smoothing ben e t and the moral hazard cost of insurance are suboptimal social and private insurance diverge a paternalistic social planner corrects the moral hazard cost for the distortion in the insured s eort choice while private insurers focus on the perceived rather than the true smoothing bene ts when unemployed workers are optimistic privatizing unemployment insurance may result in ine ciently low or rapidly decreasing unemployment bene ts

who bears aggregate fluctuations and how the consumption of high consumption households is more exposed to fluctuations in aggregate consumption and income than that of low consumption households in the consumer expenditure cex survey the exposure to aggregate consumption growth of households in the top 10 percent of the consumption distribution in the cex is about five times that of households in the bottom 80 percent given real aggregate per capita consumption growth about 3 percentage points less than its historical mean during the past year these figures predict that the ratio of consumption of the top 10 percent to the bottom 80 percent has fallen by about 15 percentage points relative to trend using income data from piketty and saez 2003 we show that the income especially the wage income of rich households is more exposed to aggregate fluctuations so their higher income exposure is a likely contributor to their higher consumption exposure finally we find a striking change in the exposure of the incomes of high income households prior to the early 1980 s the incomes of high income households were not more exposed to aggregate fluctuations thus while high income households currently bear an inordinately large share of aggregate fluctuations this is a recent occurrence this abstract was borrowed from another version of this item

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

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

a further look at the propagation of monetary policy shocks in hank we provide quantitative guidance on whether and to what extent different elements of heterogeneous agent new keynesian hank models amplify or dampen the response of aggregate consumption to a monetary policy shock we emphasize four findings first the introduction of capital adjustment costs does not affect the aggregate response but does change the transmission mechanism so that a larger share of indirect effects originates from equity prices rather than from labor income second incorporating estimated unequal incidence functions for aggregate labor income fluctuations leads to either amplification or dampening depending on the data and estimation methods third distribution rules for monopoly profits that allocate a larger share to liquid assets lead to greater amplification fourth assumptions about the fiscal reaction to a monetary policy shock have a stronger effect on the aggregate consumption response than any of the other three elements

the impact of fiscal incentives on student disability rates abstract in this paper i estimate the elasticity of student disability rates with respect to the generosity of state reimbursements the classification response is identified from policy induced variation in the amount of state aid generated by serving a disabled student across local school districts in texas from 1991 1992 through 1996 1997 my central estimates imply that fiscal incentives can explain nearly 40 of the recent growth in student disability rates in texas the magnitude of the institutional response varies by district size and enrollment concentration student race ethnicity and the level of fiscal constraint

income effects and the value of health although valuations of risk should increase with income hedonic wage studies have not been well suited to assessing this relationship using survey data on consumer valuations of product safety this paper analyzes the role of income effects for several utility functions the methodology developed in this paper assesses the effect of income on the certainty equivalent value of the health effect income elasticities range from 0 18 to 0 39 and on the risk money tradeoff for small changes in risk income elasticities range from 0 17 to 0 38 health status is a normal economic good

evaluating the performance of the search and matching model abstract does the search and matching model fit aggregate u s labor market data while the model has become an important tool of macroeconomic analysis recent literature pointed to some significant failures in accounting for the data this paper aims to answer two questions i does the model fit the data and if so on what dimensions ii does the data fit the model i e what are the data which are relevant to be explained by the model the analysis shows that the model fits certain specifications of the data on many dimensions though not on all this includes capturing the high persistence and high volatility of most of the key variables the negative co variation of unemployment and vacancies and the behavior of the worker job finding rate a key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate the latter is a major component of the rate discounting the future value of the job worker match the paper offers a workable empirically grounded version of the model for the analysis of aggregate u s labor market dynamics

heterogeneity and tests of risk sharing how well do people share risk standard risk sharing regressions assume that any variation in households risk preferences is uncorrelated with variation in the cyclicality of income i combine administrative and survey data to show that this assumption is questionable risk tolerant workers hold jobs in which earnings carry more aggregate risk the correlation makes risk sharing regressions in the previous literature too pessimistic i derive techniques that eliminate the bias apply them to u s data and find that the effect of idiosyncratic income shocks on consumption is practically small and statistically difficult to distinguish from zero

changes in safety net use during the great recession abstract we examine how participation in social safety net programs differs by income to poverty levels and how that relationship changed after the great recession we define income to poverty based on the average of 2 years of merged cps data and investigate program participation among households with income less than 300 percent of poverty we find changes in both the level and distribution of safety net program participation during the great recession with snap expanding most at the bottom the eitc expanding most in the middle and ui expanding most at the top of the income ranges that we investigate tanf did not expand

background risk of food insecurity and insurance behaviour evidence from the west bank this paper explores behavioural changes resulting from the presence of a uninsurable background risk due to markets incompleteness not all risks are insurable we empirically test the theory and the intuition suggesting that people bearing an uninsurable background risk are less willing to bear other insurable risks and therefore increase their demand for insurance against insurable risks we present a case study on the palestinian territories we consider the implications of a background risk of food insecurity a major formally uninsurable risk using nationally representative household data using a bivariate probit model we find that exposure to severe food insecurity risk increases the propensity to insure against health risks and this propensity is increasing in background risk intensity our findings point to possible incentive changes towards the desirability of insurance that have implications for policy design

recent trends in insured and uninsured unemployment is there an explanation this paper explores the recent decline in the fraction of unemployed workers who receive unemployment insurance benefits using march current population surveys we compare the fraction who are potentially eligible for benefits with the fraction who receive them the decline in insured unemployment is almost entirely due to a decline in the early 1980s in the takeup rate for benefits we analyze the determinants of the takeup rate using both aggregated state level data and micro data at least half the decline is due to an increasing share of unemployment in states with lower takeup rates

unemployment insurance take up rates in an equilibrium search model abstract from 1989 to 2012 on average 23 of those eligible for unemployment insurance ui benefits in the us did not collect them to understand the implications of these unclaimed benefits we develop a directed search model with an endogenous ui take up rate in equilibrium ui collectors have longer unemployment durations relative to non collectors the difference results from two forces a consumption effect and a private information effect as ui collection histories are unobservable we characterize both effects analytically and quantitatively with an endogenous take up rate the unemployment rate and average duration of unemployment respond significantly slower to changes in the ui benefit level relative to the standard model with a 100 take up rate the private information effect on non collector job finding rates plays an important role in this result

does the sophistication of use of unemployment insurance evolve with experience the subject of this paper is the repeat use of ui ei benefits in canada the first objective is to investigate empirically the pattern of adjustment that ui users exhibit over a multiple claim horizon our secondary objective is to investigate a behavioural channel that might potentially underlie observed adjustment effects namely individual learning effects we estimate an econometric model of how certain features of their claims change as they file subsequent claims we find strong empirical patterns suggesting that there does appear to be some sort of an adjustment process beneficiaries tend to approach a desired value for these particular facets of their ui claims there appears to be some process of growing sophistication of ui use which some might label gaming the system reflecting the adjustment of claims and the concomitant employment patterns to the provisions and rules of the regime we also uncover evidence in favour of the existence of individual learning effects ce texte examine l usage a repetition des prestations d assurance chomage au canada le premier objectif est d etudier empiriquement le pattern d ajustement des recipiendaires de prestations au fil de multiples reclamations le second objectif est d etudier un canal d ajustement des comportements qui pourrait sous tendre les ajustements observes les effets d apprentissage individuel on calibre un modele econometrique qui expose certains aspects des reclamations qui changent au fil des reclamations qui se repetent des resultats empiriques robustes suggerent qu il semble y avoir un processus d ajustement les beneficiaires tendent a s approcher de valeurs desirees pour certaines facettes de leurs reclamations d assurance chomage il semble y avoir un processus de sophistication dans l usage de l assurance chomage ce que certains pourraient appeler bien jouer avec le systeme reflechissant l ajustement des reclamations et des patterns concomitants d emploi aux dispositions et reglements du regime on decouvre aussi l existence d effets d apprentissage individuel

moral hazard vs liquidity and optimal unemployment insurance this paper presents new evidence on why unemployment insurance ui benefits affect search behavior and develops a simple method of calculating the welfare gains from ui using this evidence i show that 60 percent of the increase in unemployment durations caused by ui benefits is due to a liquidity effect rather than distortions on marginal incentives to search moral hazard by combining two empirical strategies first i find that increases in benefits have much larger effects on durations for liquidity constrained households second lump sum severance payments increase durations substantially among constrained households i derive a formula for the optimal benefit level that depends only on the reduced form liquidity and moral hazard elasticities the formula implies that the optimal ui benefit level exceeds 50 percent of the wage the exact identification approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives

unemployment insurance takeup rates and the after tax value of benefits the recent decline in the unemployment insurance ui takeup rate has puzzled researchers using administrative data with accurate information on the potential level and duration of benefits we examine whether a separating employee receives ui we find a strong positive effect of the benefit level on takeup and smaller effects of the potential duration and the tax treatment of benefits simulations indicate that the recent inclusion of ui in the income tax base can account for most of the previously unexplained decline in ui receipt

insurance within the firm we evaluate the allocation of risk between firms and their workers using matched employer employee panel data unlike previous contributions this paper focuses on idiosyncratic shocks to the firm which are the correct empirical counterpart of the theoretical notion of diversifiable risk we allow for both temporary and permanent shocks to output and find that firms absorb temporary fluctuations fully but insure workers against permanent shocks only partially risk sharing considerations can account for about 15 percent of overall earnings variability the remainder originating from idiosyncratic shocks to individual workers our welfare calculations indicate that firms are an important vehicle of insurance provision

labor market shocks and retirement do government programs matter abstract this paper argues that labor market conditions are an important and often overlooked determinant of retirement transitions in our analysis we examine how the unemployment rate affects retirement and whether the social security ss system and unemployment insurance ui system influence how older workers respond to labor market shocks we use pooled cross sectional data from the march current population survey cps in our analysis we find that downturns in the labor market increase retirement transitions and that the magnitude of this effect is comparable to that associated with moderate changes in financial incentives to retire and to the threat of a health shock facing older workers interestingly retirements only increase in response to an economic downturn once workers become ss eligible suggesting that retirement benefits may help to alleviate the income loss associated with a weak labor market we also estimate the impact of ui generosity on retirement and find little consistent evidence of an effect this suggests that in some ways ss may serve as a more effective form of unemployment insurance for older workers than ui

erratum moral hazard versus liquidity and optimal unemployment insurance this paper presents new evidence on why unemployment insurance ui benefits affect search behavior and develops a simple method of calculating the welfare gains from ui using this evidence i show that 60 percent of the increase in unemployment durations caused by ui benefits is due to a liquidity effect rather than distortions on marginal incentives to search moral hazard by combining two empirical strategies first i find that increases in benefits have much larger effects on durations for liquidity constrained households second lump sum severance payments increase durations substantially among constrained households i derive a formula for the optimal benefit level that depends only on the reduced form liquidity and moral hazard elasticities the formula implies that the optimal ui benefit level exceeds 50 percent of the wage the exact identification approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives c 2008 by the university of chicago all rights reserved this abstract was borrowed from another version of this item

aggregate risk and wage dispersion abstract integrating elements of finance and labor theory i quantify the degree to which aggregate risk affects wage premia in the model wages are stochastic covary with the state of the economy and command a risk premium using asset price data i develop a lower bound for this premium and show that it is quantitatively large for highly cyclical jobs with volatile labor compensation by raising top incomes this channel has played a role in amplifying income inequality

incentive effects of workers compensation insurance abstract this paper uses micro level data from the current population survey to estimate the determinants of participation in state workers compensation programs in the united states the principal finding is that higher workers compensation benefits are associated with greater participation in the workers compensation program after accounting for a variety of covariates in addition the waiting period is found to have a substantial negative effect on program participation finally time series estimates based on the cross sectional model show that the growth in workers compensation claims in the 1970s corresponds reasonably well with the growth in real benefits in this time period

what happens when the insurer can say no assessing prior authorization as a tool to prevent high risk prescriptions and to lower costs abstract insurers are increasingly requiring physicians to obtain prior authorization before prescribing drugs that are costly or have high abuse potential these prior authorization requirements have the potential to reduce risky prescriptions and to lower prescription drug costs but little is known about their ability to do either this study estimates the effect of a prior authorization requirement for certain costly and abuse prone drugs on prescription drug use and costs for work related injuries in texas the findings indicate that the prior authorization requirement reduces the likelihood that claimants receive non preferred drugs as well as insurers spending on non preferred drugs while there is some substitution to preferred drugs i do not find evidence of large increases in spending on preferred drugs the estimated effects on average total pharmacy spending are imprecise though there is suggestive evidence that the prior authorization requirement reduces the likelihood that a claim has high prescription drug costs the results provide strong evidence that the prior authorization requirement drastically reduces the likelihood that patients receive combinations of drugs that have contributed disproportionately to the rise in prescription drug overdoses despite the success of prior authorization in lowering spending on non preferred drugs and in reducing high risk prescriptions i find little evidence that prior authorization has disproportionately large effects on the most dangerous prescription drug use and only weak suggestive evidence that it has larger effects on prescription drug use that likely arises because physicians are not fully informed suggesting that prior authorization requirements do not necessarily target the riskiest drug use

is it really possible to build a bridge between cost benefit analysis and cost effectiveness analysis cost benefit analysis cba is a recognised as the economic evaluation technique that accords most with the underlying principles of standard welfare economic theory however due to problems associated with the technique economists evaluating resources allocation decisions in health care have most often used cost effective analysis cea in which health benefits are expressed in non monetary units as a result attempts have been made to build a welfare economic bridge between cost benefit analysis cba and cost effectiveness analysis cea in this paper we develops these attempts and finds that while assumptions can be made to facilitate a constant willingness to pay per unit of health outcome these restrictions are highly unrealistic we develop an impossibility theorem that shows it is not possible to link cba and cea if i the axioms of expected utility theory hold ii the quality adjusted life year qaly model is valid in a welfare economic sense and iii illness affects the ability to enjoy consumption we conclude that within a welfare economic framework it would be unwise to rely on a link between cba and cea in economic evaluations

estimation of state dependent utility functions using survey data surveys of individual s risk dollar trade offs illuminate not only the local trade off rates but also can be used to address more fundamental questions about the structure of utility functions this largely unexplored empirical area is investigated by developing an econometric technique to estimate utility functions based on survey data on risk dollar trade offs for minor health effects the empirical tests indicate that for all but one of the temporary health effects considered consumers treat injuries as tantamount to a drop in income implying that the health impact does not alter the structure of the utility function in a fundamental way copyright 1991 by mit press

comparative advantage and unemployment worker heterogeneity in productivity and labor supply is introduced into a matching model workers who earn high wages and work high hours are identified as those with strong market comparative advantage high rents from being employed the model is calibrated to match separation job finding and employment in the sipp data the model predicts a big drop in employment for workers with weak comparative advantage during recessions but the data show that workers with strong comparative advantage also display sizable employment fluctuations implying that aggregate employment fluctuations are not explained by the responses of workers with small rents to employment

how changes in unemployment benefit duration affect the inflow into unemployment we study the effect of an unexpected reduction in maximum unemployment benefit duration on the inflow into unemployment of elderly workers in the netherlands we analyze the reduction as if it was a natural experiment finding substantial effects

unemployment participation and worker flows over the life cycle we estimate and report life cycle transition probabilities between employment unemployment and inactivity for male workers using current population survey monthly files we assess the relative importance of each probability in explaining the life cycle profiles of participation and unemployment rates using a novel decomposition method a key robust finding is that most differences in participation and unemployment over the life cycle can be attributed to the probability of leaving employment and the probability of transiting from inactivity to unemployment while transitions from unemployment to employment the job finding probability play secondary roles we then show that a simple life cycle extension of a three state labor search model with leisure shocks can qualitatively replicate the empirical unemployment and participation life cycle profiles without introducing age or worker heterogeneity in market abilities we conclude that models that seek to explain life cycle work patterns should not ignore transitions to and from inactivity

takeup social multipliers and optimal social insurance abstract this paper examines the optimal provision of unemployment insurance ui in a framework that accounts for behavioral responses along both the intensive and extensive margins two formulations of takeup are considered in the first individuals face a takeup cost that is exogenous in the second the cost depends endogenously on the takeup rate such endogenous costs to takeup lead to a social multiplier a reduced form parameter summarizing the strength of social interactions this paper derives a formula for the optimal replacement rate in terms of the takeup and duration elasticities and the social multiplier the formula is applied by estimating the social multiplier using policy variation in ui benefit levels the results suggest that social multiplier effects account for 35 of the total effect of ui on takeup and yield an optimal replacement rate around 60 of pre unemployment wages 20 higher than previous estimates

job search requirements for unemployed at the end of working life effects on unemployment dynamics and self employment probabilities this paper investigates the extent to which job search requirements in unemployment insurance u i increase the probability of self employment as a retirement route for causal identification we apply a difference in differences approach using a dutch 2004 policy reform that introduced job search requirements in u i for persons aged 57 5 and older unemployment dynamics and self employment probabilities are studied using a dynamic multinomial logit model with unobserved heterogeneity the results suggest that job search requirements stimulated people to exit unemployment and discouraged older workers to enter unemployment the probability of self employment as an exit route to retirement increased relative to u i but not relative to paid employment

financial markets intermediaries and intertemporal smoothing in an overlapping generations economy with incomplete financial markets but no intermediaries there is underinvestment in safe assets in an economy with intermediaries and no financial markets accumulating reserves of safe assets allows returns to be smoothed nondiversifiable risk to be eliminated and an ex ante pareto improvement compared to the allocation in the market equilibrium to be achieved in a mixed financial system however competition from financial markets constrains intermediaries so that they perform no better than markets alone

worker investments in safety workplace accidents and compensating wage differentials the theory of compensating wage differentials cwds assumes that firms supply and workers demand workplace safety predicting a positive relationship between accident risk and wages this article allows for safety provision by workers which predicts a countervailing negative relationship between individual risk and wages firms pay higher wages for higher safety related productivity using national longitudinal survey of youth panel data and data on fatal and nonfatal accidents our precise cwds imply a value of a statistical injury of 45 4 thousand and a value of a statistical life of 6 3 million in line with our model individual risk and wages are negatively correlated

a general formula for the optimal level of social insurance in an influential paper baily 1978 showed that the optimal level of unemployment insurance ui in a stylized static model depends on only three parameters risk aversion the consumption smoothing benefit of ui and the elasticity of unemployment durations with respect to the benefit rate this paper examines the key economic assumptions under which these parameters determine the optimal level of social insurance i show that a baily type expression with an adjustment for precautionary saving motives holds in a general class of dynamic models subject to weak regularity conditions for example the simple reduced form formula derived here applies with arbitrary borrowing constraints durable consumption goods private insurance arrangements and search and leisure benefits of unemployment

measuring the average marginal tax rate from the individual income tax the economic effects of taxation depend on the configuration of marginal tax rates we consider here the appropriate measure of a marginal tax rate for the federal individual income tax which has a graduated rate structure and allows for numerous legal and illegal deductions from total income our conclusion is that the explicit marginal rate from the tax schedule is the right concept for many purposes hence we construct approximately weighted averages of these marginal tax rates for 1916 80 when weighted by adjusted gross income the arithmetic average of marginal tax rates is 5 in 1920 2 in 1930 6 in 1940 20 in 1950 23 in 1960 24 in 1970 and 30 in 1980 we also discuss the dispersion of marginal tax rates as well as the behavior of average tax rates and deductions from taxable income one noteworthy result concerns the fraction of adjusted gross income that accrues to families that face a marginal tax rate of at least 35 this fraction quadruples from 1964 to 1980 this abstract was borrowed from another version of this item

labor market effects of u s sick pay mandates this paper exploits temporal and spatial variation in the implementation of nine city and four state level u s sick pay mandates to assess their labor market consequences we use the synthetic control group method and traditional difference in differences models along with the quarterly census of employment and wages to estimate the causal effects of mandated sick pay on employment and wages we do not find much evidence that employment or wages were significantly affected by the mandates that typically allow employees to earn one hour of paid sick leave per work week up to seven days per year employment decreases of 2 percent lie outside the 92 percent confidence interval and wage decreases of 3 percent lie outside the 95 percent confidence interval abstract from author

workers compensation recent developments in moral hazard and benefit payments studies using pre 1990 data generally found benefit and frequency elasticities for workers compensation cash benefits that exceeded respectively 1 0 and 0 an increase in expected benefits appar