moral hazard adverse selection and health expenditures a semiparametric analysis theoretical models predict asymmetric information in health insurance markets may generate inefficient outcomes due to adverse selection and moral hazard however previous empirical research has found it difficult to disentangle adverse selection from moral hazard in health care consumption we propose a two step semiparametric estimation strategy to identify and estimate a canonical model of asymmetric information in health care markets with this method we can estimate a structural model of demand for health care we illustrate this method using a claims level data set with confidential information from a large self insured employer we find significant evidence of moral hazard and adverse selection

nonparametric bounds on the returns to language skills this paper applies the theoretical literature on nonparametric bounds on treatment effects to the estimation of how limited english proficiency lep affects wages and employment opportunities for hispanic workers in the united states i analyse the identifying power of several weak assumptions on treatment response and selection and stress the interactions between lep and education occupation and immigration status i show that the combination of two weak but credible assumptions provides informative upper bounds on the returns to language skills for certain subgroups of the population adding age at arrival as a monotone instrumental variable also provides informative lower bounds copyright 2005 john wiley sons ltd

head start and the distribution of long term education and labor market outcomes we investigate the effect of head start on education and wage income for individuals in their 30s in the nlsy79 we contribute to the existing literature by examining effects across outcome distrib

financial aid debt management and socioeconomic outcomes post college effects of merit based aid abstract prior research has demonstrated that financial aid can influence both college enrollments and completions but less is known about its post college consequences this study is the first to link college and financial aid information to credit bureau data later in life enabling us to examine the impacts of grant aid on homeownership neighborhood characteristics and credit outcomes we use a regression discontinuity rd strategy to identify causal effects of the wv promise scholarship a broad based state merit aid program up to 10 years after college entry the rd is imperfect because our sample is limited to college students and the scholarship program increased enrollment but there is little evidence of selection on observables at the threshold we find that scholarship recipients near the test score cutoff for eligibility are more likely to earn a graduate degree are more likely to own a home and live in higher income neighborhoods effects on annual earnings and credit outcomes are similarly positive but imprecise these positive effects are primarily due to substantial reductions in time to degree rather than to reduced student debt upon graduation

micro data heterogeneity and the evaluation of public policy nobel lecture this paper summarizes the contributions of microeconometrics to economic knowledge four main themes are developed 1 microeconometricians developed new tools to respond to econometric problems raised by the analysis of the new sources of micro data produced after the second world war 2 microeconometrics improved on aggregate time series methods by building models that linked economic models for individuals to data on individual behavior 3 an important empirical regularity detected by the field is the diversity and heterogeneity of behavior this heterogeneity has profound consequences for economic theory and for econometric practice 4 microeconometrics has contributed substantially to the scientific evaluation of public policy

identification issues in the public private wage gap with an application to italy this paper reviews some of the standard assumptions that are imposed in order to estimate the average public private wage gap and that are mainly related to the possible selection of the sector there are two contributions to the existing public private wage gap literature one is a better understanding of the identified parameters standard estimators identify a local effect late which in general cannot be generalized to the entire population as instead is almost always done the other is the partial identification of the population average treatment effect with an instrumental variable to the best of my knowledge this is the first paper in this literature that employs bounds the technique is applied to male workers in italy for compliers late estimates a wage advantage from working in the public sector greater than 30 this return is within the narrowest bounds on the population average treatment effect that are consistent even with a much smaller gap about 15 or more

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

generating skilled self employment in developing countries experimental evidence from uganda we study a government program in uganda designed to help the poor and unemployed become self employed artisans increase incomes and thus promote social stability young adults in uganda s conflict affected north were invited to form groups and submit grant proposals for vocational training and business start up funding was randomly assigned among screened and eligible groups treatment groups received unsupervised grants of 382 per member grant recipients invest some in skills training but most in tools and materials after four years half practice a skilled trade relative to the control group the program increases business assets by 57 work hours by 17 and earnings by 38 many also formalize their enterprises and hire labor we see no effect however on social cohesion antisocial behavior or protest effects are similar by gender but are qualitatively different for women because they begin poorer meaning the impact is larger relative to their starting point and because women s work and earnings stagnate without the program but take off with it the patterns we observe are consistent with credit constraints

sharp iv bounds on average treatment effects on the treated and other populations under endogeneity and noncompliance in the presence of an endogenous binary treatment and a valid binary instrument causal effects are point identified only for the subpopulation of compliers given that the treatment is monotone in the instrument with the exception of the entire population causal inference for further subpopulations has been widely ignored in econometrics we invoke treatment monotonicity and or dominance assumptions to derive sharp bounds on the average treatment effects on the treated as well as on other groups furthermore we use our methods to assess the educational impact of a school voucher program in colombia and discuss testable implications of our assumptions

further discussion on linear production functions and dea abstract the purpose of the current paper is to clarify the misunderstanding in using the constant returns to scale crs model in data envelopment analysis dea to estimate returns to scale rts classification by illustrating the following two different assumptions a all decision making units dmus are assumed to be compared to a crs frontier in the ccr model i e all dmus are assumed to be capable of operating under crs and b all dmus exhibit crs several incorrect points about rts estimation raised by chang k p and guh y y 1991 european journal of operational research 52 215 223 and chang k p 1997 european journal of operational research 97 597 599 are examined it is shown that the assumption a does not mean that the rts classification cannot be estimated the crs frontier assumption cannot change the rts nature of each dmu since the ccr model mixes a technical efficiency and a scale efficiency it is possible and meaningful to use the ccr results to determine the rts classification finally the infeasibility of chang and guh s 1991 treatment of non archimedean infinitesimal is discussed

monotone instrumental variables with an application to the returns to schooling for fifty years econometric analyses of treatment response have made extensive use of instrumental variable iv assumptions holding that mean response is constant across specified subpopulations of a population of interest 2 yet the credibility of mean independence conditions and other iv assumptions has often been a matter of considerable disagreement with much debate about whether some covariate is or is not a valid instrument in an application of interest there is therefore good reason to consider weaker but more credible assumptions to this end we introduce monotone instlumental variable miv assumptions holding that mean response varies weakly monotonically across specified subpopulations we study the identifying power of these miv assumptions and give an empirical application the findings reported here add to the literature developing nonparametric bounds on treatment effects 3 this paper uses the same formal setup as manski 1997 there is a probability space j x2 p of individuals each member j of population j has observable covariates xi e x and a response function yj t y mapping the mutually exclusive and exhaustive treatments t e t into outcomes yj t e y person j has a realized treatment zj e t and a realized outcome y 1 y zi both of which are observable the latent outcomes yj t

misreported schooling and returns to education evidence from the uk this paper aims to provide a number of contributions of policy practical and methodological interest to the study of the returns to educational qualifications first we derive estimates of the returns to different qualifications for the uk that allow for the possibility of misreported attainment using data from the british national child development survey to date any major empirical evidence on the importance of this issue is restricted to the us where it was shown that errors might indeed play a non negligible role second we aim to provide the academic and policy community with estimates of the accuracy of commonly used types of data on educational attainment administrative files self reported information close to the date of completion of the qualification and recall information ten years after completion third by using the unique nature of our data we assess how the biases from measurement error and from omitted ability and family background variables interact in the estimation of returns we intend to produce simple calibration rules to allow policymakers to use nationally representative data such as the labour force survey that totally rely on self reported information on qualifications and contain little or no information on individual ability and family background we rely throughout on a unified framework of general applicability to study the impact of misreported treatment status on the estimation of causal treatment effects jel codes c10 i20 j31

censored quantile instrumental variable estimates of the price elasticity of expenditure on medical care efforts to control medical care costs depend critically on how individuals respond to prices i estimate the price elasticity of expenditure on medical care using a censored quantile instrumental variable cqiv estimator cqiv allows estimates to vary across the conditional expenditure distribution relaxes traditional censored model assumptions and addresses endogeneity with an instrumental variable my instrumental variable strategy uses a family member s injury to induce variation in an individual s own price across the conditional deciles of the expenditure distribution i find elasticities that vary from 0 76 to 1 49 which are an order of magnitude larger than previous estimates

the effect of patient cost sharing on utilization health and risk protection abstract this paper exploits a sharp reduction in patient cost sharing at age 70 in japan using a regression discontinuity design to examine its effect on utilization health and financial risk arising from out of pocket expenditures due to the national policy cost sharing is 60 80 percent lower at age 70 than at age 69 i find that both outpatient and inpatient care are price sensitive among the elderly while i find little impact on mortality and other health outcomes the results show that reduced cost sharing is associated with lower out of pocket expenditures especially at the right tail of the distribution jel g22 i11 i12 i13 i18 j14

the effect of insurance coverage on preventive care despite the growth in health insurance products that differentially cover preventive care and nonpreventive care little is known about how preventive care utilization responds to targeted changes in coverage using administrative data from a large company this paper examines the implementation of an insurance benefit design which differentially increased the price of nonpreventive care while decreasing the price of prevention leveraging a difference in differences research strategy we find that preventive care utilization did not increase and even declined due to the differential price change this evidence indicates a meaningful negative cross price effect suggesting that nonpreventive care and preventive care are complements jel i13 i11

life cycle responses to health insurance status this paper studies the lifetime effects of exogenous changes in health insurance coverage e g medicare ppaca termination of employer provided plans on the dynamic optimal allocation consumption leisure health expenditures status health and wealth and welfare we solve simulate and structurally estimate a parsimonious life cycle model with endogenous exposure to morbidity and mortality risks and exogenous health insurance by varying coverage we identify the marginal effects of insurance when young and or when old on allocations statuses and welfare our results highlight positive effects of insurance on health wealth and welfare as well as mid life substitution away from healthy leisure in favor of more health expenses caused by peaking wages and accelerating health issues

evaluating education programs that have lotteried admission and selective attrition we study the effectiveness of magnet programs in an urban district that ration excess demand by admission lotteries differential attrition arises since students who lose the lottery are more likely to pursue options outside the school district than students who win the lottery when students leave the district important outcome variables are often not observed the treatment effects are not point identified we exploit known quantiles of the outcome distribution to construct informative bounds on treatment effects we find that magnet programs improve behavioral outcomes but have no significant effect on achievement

anonymity or distance job search and labour market exclusion in a growing african city we show that helping young job seekers signal their skills to employers generates large and persistent improvements in their labour market outcomes we do this by comparing an intervention that improves the ability to signal skills the job application workshop to a transport subsidy treatment designed to reduce the cost of job search in the short run both interventions have large positive effects on the probability of finding a formal job the workshop also increases the probability of having a stable job with an open ended contract four years later the workshop significantly increases earnings job satisfaction and employment duration but the effects of the transport subsidy have dissipated gains are concentrated on individuals who generally have worse labour market outcomes overall our findings highlight that young people possess valuable skills that are unobservable to employers making these skills observable generates earnings gains that are far greater than the cost of the intervention

partial identification of counterfactual choice probabilities this article shows how to predict counterfactual discrete choice behavior when the presumed behavioral model partially identifies choice probabilities the simple general approach uses observable choice probabilities to partially infer the distribution of types in the population and then applies the results to predict behavior in unrealized choice settings two illustrative applications are given one assumes only that persons have strict preferences the other assumes strict preferences and utility functions that are linear in attribute bundles with no restrictions on the shape of the distribution of preference parameters

information mobile telephony and traders search behavior in niger information and communications technologies have spread rapidly in developing countries we investigate the impact of mobile phones on traders search behavior in niger by constructing a theoretical model of search in which traders engage in sequential search for the optimal sales price using a trader panel dataset spanning 2005 2007 we find empirical support for the model in that the duration of mobile phone coverage is associated with increased search activity this effect evolves dynamically over time and is stronger for larger traders who engage in arbitrage over longer distances results provide empirical evidence for the observed linkages between mobile telephony and price dispersion

set identification in models with multiple equilibria we propose a computationally feasible way of deriving the identified features of models with multiple equilibria in pure or mixed strategies it is shown that in the case of shapley regular normal form games the identified set is characterized by the inclusion of the true data distribution within the core of a choquet capacity which is interpreted as the generalized likelihood of the model in turn this inclusion is characterized by a finite set of inequalities and efficient and easily implementable combinatorial methods are described to check them in all normal form games the identified set is characterized in terms of the value of a submodular or convex optimization program efficient algorithms are then given and compared to check inclusion of a parameter in this identified set the latter are illustrated with family bargaining games and oligopoly entry games copyright 2011 oxford university press

moral hazard in health insurance do dynamic incentives matter using data from employer provided health insurance and medicare part d we investigate whether healthcare utilization responds to the dynamic incentives created by the nonlinear nature of health insurance contracts we exploit the fact that because annual coverage usually resets every january individuals who join a plan later in the year face the same initial spot price of healthcare but a higher expected end of year future price we find a statistically significant response of initial utilization to the future price rejecting the null that individuals respond only to the spot price we discuss implications for analysis of moral hazard in health insurance

treatment effect heterogeneity in theory and practice instrumental variables iv methods identify internally valid causal effects for individuals whose treatment status is manipulable by the instrument at hand inference for other populations requires homogeneity assumptions this paper outlines a theoretical framework that nests causal homogeneity assumptions these ideas are illustrated using sibling sex composition to estimate the effect of childbearing on economic and marital outcomes the application is motivated by american welfare reform the empirical results generally support the notion of reduced labour supply and increased poverty as a consequence of childbearing but evidence on the impact of childbearing on marital stability and welfare use is more tenuous

estimating the tradeoff between risk protection and moral hazard with a nonlinear budget set model of health insurance insurance induces a tradeoff between the welfare gains from risk protection and the welfare losses from moral hazard empirical work traditionally estimates each side of the tradeoff separately potentially yielding mutually inconsistent results i develop a nonlinear budget set model of health insurance that allows for both simultaneously nonlinearities in the budget set arise from deductibles coinsurance rates and stoplosses that alter moral hazard as well as risk protection i illustrate the properties of my model by estimating it using data on employer sponsored health insurance from a large firm

medical savings accounts microsimulation results from a model with adverse selection this paper examines medical savings accounts combined with high deductible catastrophic health plans msa chps exploring the possible consequences of making tax preferred msa chps available to the entire employment related health insurance market the paper uses microsimulation methods to examine the equilibrium effects of msa chps on health care and non health care expenditures tax revenues insurance premiums and exposure to risk if msa chps are offered alongside comprehensive plans biased msa chp enrollment can lead to premium spirals that drive out comprehensive coverage our estimates also raise concerns about equity insofar as those who stand to lose the most tend to be poorer and in families with infant children

the 2009 lawrence r klein lecture diversified treatment under ambiguity this article develops a broad theme about treatment under ambiguity through study of a particular decision criterion the broad theme is that a planner may want to cope with ambiguity by diversification assigning observationally identical persons to different treatments study of the minimax regret mr criterion substantiates the theme the article significantly extends my earlier analysis of one period planning with an individualistic treatment and a linear welfare function i show that mr treatment allocations are fractional in a large class of planning problems with nonlinear welfare functions interacting treatments learning and noncooperative aspects

recent two stage sample selection procedures with an application to the gender wage gap recently developed two stage estimation methods of sample selection models are used in the context of data from the 1989 labor market activity survey to examine labor supply decisions and wage outcomes for employed men and women recent hypothesis test procedures are used to test for no sample selection and to test for a parametric against a semiparametric selection correction procedure we conclude that selection is indeed an issue for the sample at hand and that the semiparametric specification is appropriate we also present the standard decomposition of the gender wage gap into its explained and unexplained portions

mobile phone coverage and producer markets evidence from west africa mobile phone coverage has expanded considerably throughout the developing world particularly within sub saharan africa existing evidence suggests that increased access to information technology has improved agricultural market efficiency for consumer markets and certain commodities but there is less evidence of its impact on producer markets building on the work of aker 2010 this paper estimates the impact of mobile phone coverage on producer price dispersion for three commodities in niger the results suggest that mobile phone coverage reduces spatial producer price dispersion by 6 percent for cowpea a semi perishable commodity these effects are strongest for remote markets and during certain periods of the year the introduction of mobile phone coverage has no effect on producer price dispersion for millet and sorghum two staple grains that are less perishable and are commonly stored by farmers there are no impacts of mobile phone coverage on traders gross margins or producer price levels but mobile phone coverage is associated with a reduction in the intra annual price variation for cowpea these results are potentially explained by the fact that farmers engage in greater storage for storable commodities such as millet and sorghum

what does a deductible do the impact of cost sharing on health care prices quantities and spending dynamics measuring consumer responsiveness to medical care prices is a central issue in health economics and a key ingredient in the optimal design and regulation of health insurance markets we study consumer responsiveness to medical care prices leveraging a natural experiment that occurred at a large self insured firm which required all of its employees to switch from an insurance plan that provided free health care to a non linear high deductible plan the switch caused a spending reduction between 11 79 13 80 of total firm wide health spending we decompose this spending reduction into the components of i consumer price shopping ii quantity reductions and iii quantity substitutions finding that spending reductions are entirely due to outright reductions in quantity we find no evidence of consumers learning to price shop after two years in high deductible coverage consumers reduce quantities across the spectrum of health care services including potentially valuable care e g preventive services and potentially wasteful care e g imaging services we then leverage the unique data environment to study how consumers respond to the complex structure of the high deductible contract we find that consumers respond heavily to spot prices at the time of care and reduce their spending by 42 when under the deductible conditional on their true expected end of year shadow price and their prior year end of year marginal price in the first year post plan change 90 of all spending reductions occur in months that consumers began under the deductible with 49 of all reductions coming for the ex ante sickest half of consumers under the deductible despite the fact that these consumers have quite low shadow prices there is no evidence of learning to respond to the true shadow price in the second year post switch

estimating most productive scale size using data envelopment analysis abstract the relation between the most productive scale size mpss for paparticular input and output mixes and returns to scale for multiple inputs multiple outputs situations is explicitly developed this relation is then employed to extend the applications of data envelopment analysis dea introduced by charnes cooper and rhodes ccr to the estimation of most productive scale sizes for convex production possibility sets it is then shown that in addition to productive inefficiencies at the actual scale size the ccr efficiency measure also reflects any inefficiencies due to divergence from the most productive scale size two illustrations of the practical applications of these results to the estimation of most productive scale sizes and returns to scale for hospitals and stem electric generation plants are also provided emphasize the advantage of this method in examining specific segments of the efficient production surface

identification and asymptotic approximations three examples of progress in econometric theory in empirical economics the size and quality of datasets and computational power has grown substantially along with the size and complexity of the econometric models and the population parameters of interest with more and better data it is natural to expect to be able to answer more subtle questions about population relationships and to pay more attention to the consequences of misspecification of the model for the empirical conclusions much of the recent work in econometrics has emphasized two themes the first is the fragility of statistical identification the other related theme involves the way economists make large sample approximations to the distributions of estimators and test statistics i will discuss how these issues of identification and alternative asymptotic approximations have been studied in three research areas analysis of linear endogenous regressor models with many and or weak instruments nonparametric models with endogenous regressors and estimation of partially identified parameters these areas offer good examples of the progress that has been made in econometrics

adult outcomes for children of teenage mothers using data from the british household panel survey this study examines the relationship between several outcomes in early adulthood e g education inactivity earnings and health and being born to a teenage mother besides standard cross sectional multivariate regression estimates we also present evidence from non parametric estimates and from estimates that account for unmeasured family background heterogeneity by comparing siblings born to the same mother who timed their births at different ages regardless of the econometric technique being born to a teenage mother is usually associated with worse outcomes an important channel of transmission of this adverse effect is childhood family structure which plays a more powerful role than childhood family poverty albeit smaller some of the detrimental effects are also found for children of mothers who gave birth in their early 20s

the rand health insurance experiment three decades later we re present and re examine the analysis from the famous rand health insurance experiment from the 1970s on the impact of consumer cost sharing in health insurance on medical spending we begin by summarizing the experiment and its core findings in a manner that would be standard in the current age we then examine potential threats to the validity of a causal interpretation of the experimental treatment effects stemming from different study participation and differential reporting of outcomes across treatment arms finally we re consider the famous rand estimate that the elasticity of medical spending with respect to its out of pocket price is 0 2 emphasizing the challenges associated with summarizing the experimental treatment effects from non linear health insurance contracts using a single price elasticity

estimating price elasticities of convalescent care programmes this study is the first to estimate price elasticities of demand for convalescent care programmes in 1997 the german legislature more than doubled the daily co payments for the publicly insured from 6t o 13 the measure caused the overall demand for convalescent care treatments to fall by 20 to 25 i estimate the price elasticity for medical rehabilitation programmes aimed at preventing work disability to be about 0 3 whereas the elasticity for medical rehabilitation programmes for recovery from accidents at work lies around 0 5 the demand for preventive treatment at health spas is elastic and less than 1 how does the demand for medical care change when prices change since the early days of the profession of health economics the question of the price elasticity for health services has been central joseph p newhouse one of the founders of the field of health economics has published more than 100 articles alone on health care demand newhouse was also the leader of the rand group that designed and directed the famous rand health insurance experiment that focused on the impact of costsharing on the demand for medical care not only newhouse but also many other economists have devoted a great deal of attention to this topic

a note on a discussion of testing dmus returns to scale by zhu and shen european journal of operational research 81 1995 590 596

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

making the transition to prepaid medicare the medicare system is facing a financial crisis brought on by a combination of factors 1 a financing system that relies on intergenerational transfers from workers to the elderly as its major source of revenue 2 a payment scheme that traditionally has provided neither the demand nor the supply side of the market with strong incentives to hold down costs and 3 the penchant of congress to expand the coverage of the system over time every time a worthy cause or group can be identified the expansion of medicare benefits began almost immediately after the passage of the legislation in 1967 just one year after medicare had passed congress increased the number of days of in patient hospital care covered by the program in 1972 payment for the services of interns and residents in podiatry training was added to the benefit package also medicare coverage was extended to disabled persons under age 65 who were eligible for benefits under social security or railroad retirement and to certain other individuals under age 65 suffering end stage renal disease later medicare benefits were extended to state and local government employees not covered by social security and then coverage was extended to spouses of workers who were not yet covered but would be eligible to be covered in 1980 unlimited home health visits were covered as was the use of alcohol detoxification facilities in 1985 medicare provided payment for liver transplant services 1 there is current political pressure to

optimal food price stabilization in a small open developing country in poor countries most governments implement policies aiming to stabilize the prices of staple foods which often include storage and trade measures insulating their domestic market from the world market it is of crucial importance to understand the precise motivations and efficiency of those interventions because they can have consequences worldwide this paper addresses those issues by analyzing the case of a small open developing country confronted by shocks to both the crop yield and foreign price in this model government interventions may be justified by the lack of an insurance market for food prices considering this market imperfection the authors design optimal public interventions through trade and storage policies they show that an optimal trade policy largely consists of subsidizing imports and taxing exports which benefits consumers at the expense of producers import subsidies alleviate the non negativity of food storage in other words when stocks are exhausted subsidizing imports prevents domestic price spikes one striking result an optimal storage policy on its own is detrimental to consumers since its stabilizing benefits leak into the world market and it raises the average domestic price by contrast an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices

estimating demand elasticities using nonlinear pricing abstract nonlinear pricing is prevalent in industries such as health care public utilities and telecommunications however this pricing scheme introduces bias into estimating elasticities for welfare analysis or policy changes i develop a local elasticity estimation method that uses nonlinear price schedules to isolate consumers expenditure choices from selection and simultaneity biases this method improves over previous approaches by using commonly available observational data and requiring only a single general monotonicity assumption using claims level data on health insurance with two nonlinearities i am able to measure two separate elasticities and find that elasticity declines from 0 26 to 0 09 by the second nonlinearity these estimates are then used to calculate moral hazard deadweight loss this method enables estimation of many policies with nonlinear pricing which previous tools could not address

drought of opportunities contemporaneous and long term impacts of rainfall shocks on human capital higher wages are generally thought to increase human capital production particularly in the developing world we introduce a simple model of human capital production in which investments and time allocation differ by age using data on test scores and schooling from rural india we show that higher wages increase human capital investment in early life in utero to age 2 but decrease human capital from age 5 to 16 children switch out of school into productive work when rainfall is higher the opportunity cost of schooling even for fairly young children is an important factor in determining overall human capital investment

estimating demand under block rates electricity and water many empirical studies of the demand for electricity under declining block tariffs have been conducted but few have produced results consistent with traditional demand theory nordin bell j economics 7 719 21 1976 explains this in part by pointing out that most of those studies failed to take into account the income effects caused by intramarginal price differences the authors show here that nordin s suggestion involves the inappropriate use of ordinal level statistics ols they propose a method by which consistent estimates of the demand parameters can be obtained when a household s rule for selecting a block can be estimated 19 references 1 figure

the demand for episodes of treatment in the health insurance experiment abstract this paper analyzes claims data from the rand health insurance experiment which were grouped into episodes of treatment the insurance plans in the experiment have coinsurance and a cap on out of pocket spending using new statistical techniques to adjust for the increased sickliness of those who exceed the cap the effects of coinsurance on cost per episode and number of episodes are estimated cost sharing reduced the number of episodes but had little effect on cost per episode people in the experiment responded myopically as their current insurance status changed through the year the price elasticity of spending was about 0 2 throughout the range of coinsurance studied when data permit it the study of episodes complements analyses of annual medical spending by revealing more about how decisions to spend are made within the year

sensitivity to exogeneity assumptions in program evaluation in many empirical studies of the effect of social programs researchers assume that conditional on a set of observed covariates assignment to the treatment is exogenous or unconfounded aka selection on observables often this assumption is not realistic and researchers are concerned about the robustness of their results to departures from it one approach e g charles manski 1990 is to entirely drop the exogeneity assumption and investigate what can be learned about treatment effects without it with unbounded outcomes and in the absence of alternative identifying assumptions there are no restrictions on the set of possible values for average treatment effects this does not mean however that all evaluations are equally sensitive to departures from the exogeneity assumption in this paper i explore an alternative approach developed by paul rosenbaum and donald rubin 1983 where the assumption of exogeneity is explicitly relaxed by allowing for a limited amount of correlation between treatment and unobserved components of the outcomes the starting point of the sensitivity analysis is the assumption that the exogeneity assumption is satisfied only conditional on an additional unobserved covariate making assumptions about the effect of the unobserved covariate on the outcome and its correlation with the treatment i trace out the set of possible values for the treatment effect of interest by considering a sufficiently large set of possible correlations with outcomes and treatment one can recover the bounds on the treatment effect derived by manski 1990 the approach here in the spirit of rosenbaum and rubin 1983 and rosenbaum 1995 is to allow only a limited amount of correlation and to judge the sensitivity of average treatment effect estimates to such correlations there are two novel features of the proposed analysis first rather than formulate the sensitivity in terms of coefficients on the unobserved covariate the sensitivity results are presented in terms of partial r values which may be easier to interpret second the partial r values of the unobserved covariates are compared to those for the observed covariates in order to facilitate judgments regarding the plausibility of values necessary to substantially change results obtained under exogeneity the proposed sensitivity analysis is conceptually related to the practice of assessing sensitivity of estimates by comparisons with results obtained by discarding one or more observed covariates james heckman and v joseph hotz 1989 rajeev dehejia and sadek wahba 1999 jeffrey smith and petra todd 2001 the attraction of the sensitivity analysis is that it is more directly relevant one is not interested in what would have happened in the absence of covariates actually observed but in biases that are the result from not observing all relevant covariates

selection on moral hazard in health insurance economic analysis of market failure in insurance markets tends to analyze selection and moral hazard as distinct phenomena in this paper we explore the potential for selection on moral hazard in insurance markets by this we mean the possibility that moral hazard effects are heterogenous across individuals and that individuals selection of insurance coverage is affected by their anticipated behavioral response to coverage we examine these issues empirically in the context of employer provided health insurance in the united states specifically we break down the general

health care demand elasticities by type of service we estimate within year price elasticities of demand for detailed health care services using an instrumental variable strategy in which individual monthly cost shares are instrumented by employer year plan month average cost shares a specification using backward myopic prices gives more plausible and stable results than using forward myopic prices using 171 million person months spanning 73 employers from 2008 to 2014 we estimate that the overall demand elasticity by backward myopic consumers is 0 44 with higher elasticities of demand for pharmaceuticals 0 44 specialists visits 0 32 mris 0 29 and mental health substance abuse 0 26 and lower elasticities for prevention visits 0 02 and emergency rooms 0 04 demand response is lower for children in larger firms among hourly waged employees and for sicker people overall the method appears promising for estimating elasticities for highly disaggregated services although the approach does not work well on services that are very expensive or persistent

research needs and challenges in the few system coupling economic models with agronomic hydrologic and bioenergy models for sustainable food energy and water systems on october 12 13 a workshop funded by the national science foundation was held at iowa state university in ames iowa with a goal of identifying research needs related to coupled economic and biophysical models within the few system approximately 80 people attended the workshop with about half representing the social sciences primarily economics and the rest from the physical and natural sciences the focus and attendees were chosen so that findings would be particularly relevant to sbe research needs while taking into account the critical connectivity needed between social sciences and other disciplines we have identified several major gaps in existing scientific knowledge that present substantial impediments to understanding the few system we especially recommend research in these areas as a priority for future funding 1 economic models of decision making in coupled systems deliberate human activity has been the dominant factor driving environmental and land use changes for hundreds of years while economists have made great strides in modeling and understanding these choices the coupled systems modeling literature with some important exceptions has not reflected these contributions several paths forward seem fruitful first baseline economic models that assume rationality can be used much more widely than they are currently moreover the current generation of iams that include rational agents have emphasized partial equilibrium studies appropriate for smaller systems to allow this approach to be used to study larger systems the potential for and consequences of general equilibrium effects should be studied as well second it is important to address shortcomings in these models of economic decision making valuable improvements could be gained from developing coupled models that draw insights from behavioral economics many decision makers deviate systematically from actions that would be predicted by strict rationality but very few iams incorporate this behavior potentially leading to inaccurate predictions about the effects of policies and regulations improved models of human adaptation and induced technological change can also be incorporated into coupled models particularly for medium to long run models decisions about adaptation and technological change will have substantial effects on the conclusions and policy implications but more compelling methods for incorporating these changes into modeling are sorely needed in addition some economic decisions are intrinsically dynamic yet few coupled models explicitly incorporate dynamic models economic models that address uncertainty in decision making are also underutilized in coupled models of the few system 2 coupling models across disciplines despite much recent progress established models for one component of the few system often cannot currently produce outcomes that can be used as inputs for models of other components this misalignment makes integrated modeling difficult and is especially apparent in linking models of natural phenomena with models of economic decision making economic agents typically act to maximize a form of utility or welfare that is not directly linked to physical processes and they typically require probabilistic forecasts as an input to their decision making that many models in the natural sciences cannot directly produce we believe that an especially promising approach is the development of bridge models that convert outputs from one model into inputs for another such models can be viewed as application specific reduced form distillations of a richer and more realistic underlying model ideally these bridge models would be developed in collaborative research projects involving economists statisticians and disciplinary specialists and would contribute to improved understanding in the scientific discipline as well 3 model validation and comparison there is little clarity on how models should be evaluated and compared to each other both within individual disciplines and as components of larger iams this challenge makes larger integrated modeling exercises extremely difficult some potential ways to advance are by developing statistical criteria that measure model performance along the dimensions suitable for inclusion in an iam as well as infrastructure and procedures to facilitate model comparisons focusing on the models out of sample distributional forecasting performance as well as that of the iam overall is especially promising and of particular importance moreover applications of iams tend to estimate the effect of hypothetical future policy actions but there have been very few studies that have used these models to estimate the effect of past policy actions these exercises should be encouraged they offer a well understood test bed for the iams and also contribute to fundamental scientific knowledge through better understanding of the episode in question the retrospective nature of this form of analysis also presents the opportunity to combine reduced form estimation strategies with the iams as an additional method of validation

rational behavior in the presence of coverage ceilings and deductibles consumers of health care services with insurance plan features such as deductibles copayments and coverage ceilings in which the price of health care depends upon expenditures accumulated during a single year should rationally anticipate the impact of current consumption decisions on the price of health care later in the year we show that in the absence of wealth effects and risk aversion a utility maximizing consumer should base current consumption decisions on the expected end of year price of health care in a specific model with risk aversion and lumpy consumption decisions we show that the expected end of year price remains close to the true shadow price of health carefor plausible insurance plan and demand parameters we use this result in an econometric model of the demand for ambulatory mental health services

treatment effects with unobserved heterogeneity a set identification approach we propose the sharp identifiable bounds of the potential outcome distributions using panel data we allow for the possibility that statistical randomization of treatment assignments is not achieved until unobserved heterogeneity is properly controlled for we use certain stationarity assumptions to obtain the sharp bounds our approach allows for dynamic treatment decisions where the current treatment decisions may depend on the past treatments or the past observed outcomes as an empirical illustration we study the effect of smoking during pregnancy on infant birthweight we find that for the group of switchers the infant birthweight of a smoking mother is first order stochastically dominated by that of a nonsmoking mother

better late than nothing some comments on deaton 2009 and heckman and urzua 2009 two recent papers deaton 2009 and heckman and urzua 2009 argue against what they see as an excessive and inappropriate use of experimental and quasi experimental methods in empirical work in economics in the last decade they specifically question the increased use of instrumental variables and natural experiments in labor economics and of randomized experiments in development economics in these comments i will make the case that this move towards shoring up the internal validity of estimates and towards clarifying the description of the population these estimates are relevant for has been important and beneficial in increasing the credibility of empirical work in economics i also address some other concerns raised by the deaton and heckman urzua papers

housing mobility programs and economic self sufficiency evidence from a randomized experiment this paper examines the effects of a randomized housing voucher program on individual economic outcomes public housing residents who are offered relocation counseling together with housing vouchers that can only be redeemed in low poverty areas experience a reduction in welfare receipt of between 11 and 16 compared to controls these effects are not accompanied by changes in earnings or employment rates as measured by unemployment insurance records offering families unrestricted housing vouchers without additional counseling appears to have little effect on economic outcomes

bounding causal effects using data from a contaminated natural experiment analysing the effects of teenage childbearing in this paper we consider what can be learned about causal effects when one uses a contaminated instrumental variable in particular we consider what inferences can be made about the causal effect of teenage childbearing on a teen mother s subsequent outcomes when we use the natural experiment of miscarriages to form an instrumental variable for teen births miscarriages might not meet all of the conditions required for an instrumental variable to identify such causal effects for all of the observations in our sample however it is an appropriate instrumental variable for some women namely those pregnant women who experience a random miscarriage although information from typical data sources does not allow one to identify these women we show that one can adapt results from horowitz and manski 1995 on identification with data from contaminated samples to construct informative bounds on the causal effect of teenage childbearing we use these bounds to re examine the effects of early chilbearing on the teen mother s subsequent educational and labour market attainment as considered in hotz mcelroy and sanders 1995a 1995b consistent with their study these bounds indicate that women who have births as teens have higher labour market earnings and hours worked compared to what they would have attained if their childbearing had been delayed

market structure and multiple equilibria in airline markets we provide a practical method to estimate the payoff functions of players in complete information static discrete games with respect to the empirical literature on entry games originated by bresnahan and reiss 1990 and berry 1992 the main novelty of our framework is to allow for general forms of heterogeneity across players without making equilibrium selection assumptions we allow the effects that the entry of each individual airline has on the profits of its competitors its competitive effects to differ across airlines the identified features of the model are sets of parameters partial identification such that the choice probabilities predicted by the econometric model are consistent with the empirical choice probabilities estimated from the data we apply this methodology to investigate the empirical importance of firm heterogeneity as a determinant of market structure in the u s airline industry we find evidence of heterogeneity across airlines in their profit functions the competitive effects of large airlines american delta united are different from those of low cost carriers and southwest also the competitive effect of an airline is increasing in its airport presence which is an important measure of observable heterogeneity in the airline industry then we develop a policy experiment to estimate the effect of repealing the wright amendment on competition in markets out of the dallas airports we find that repealing thewright amendment would increase the number of markets served out of dallas love

estimating the effect of financial aid offers on college enrollment a regression discontinuity approach an important problem faced by colleges and universities that of evaluating the effect of their financial aid offers on student enrollment decisions is complicated by the likely endogeneity of the aid offer variable in a student enrollment equation this article shows how discontinuities in an east coast college s aid assignment rule can be exploited to obtain credible estimates of the aid effect without having to rely on arbitrary exclusion restrictions and functional form assumptions semiparametric estimates based on a regression discontinuity rd approach affirm the importance of financial aid as an effective instrument in competing with other colleges for students

nonparametric continuous discrete choice models modeling choices that are both discrete and continuous is important in several settings the purpose of this article is to explore formulation and identification of such models when indirect utility functions are specified nonparametrically here we consider general nonseparable disturbances we give identification results for nonseparable sample selection models and use these to analyze identification of discrete continuous choice models

nonparametric bounds on treatment effects assume that each member of a population is characterized by values for the variables ya yb z x here x is a vector describing a person and z is a binary variable indicating which of two treatments this person receives the treatments are labelled a and b the variables ya and yb are scalar measures of the outcomes of the two treatments for example a cancer patient might be treated by a drug therapy or b surgery the relevant outcome y might be life span following treatment an unemployed worker might be given a vocational training or b job search assistance here the relevant outcome might be labor force status following treatment assume that a random sample is drawn and that one observes the realizations of z x and of the outcome under the treatment received thus ya is observed if treatment a is received but is a latent variable if treatment b is received similarly yb is either observed or latent suppose that one wants to learn the difference in expected outcome if all persons with attributes x were assigned to treatment a or b this treatment effect is

substitution and dropout bias in social experiments a study of an influential social experiment this paper considers the interpretation of evidence from social experiments when persons randomized out of a program being evaluated have good substitutes for it and when persons randomized into a program drop out to pursue better alternatives using data from an experimental evaluation of a classroom training program we document the empirical importance of control group substitution and treatment group dropping out evidence that one program is ineffective relative to close substitutes is not evidence that the type of service provided by all of the programs is ineffective although that is the way experimental evidence is often interpreted

what do instrumental variable models deliver with discrete dependent variables we study models with discrete endogenous variables and compare the use of two stage least squares 2sls in a linear probability model with bounds analysis using a nonparametric instrumental variable model 2sls has the advantage of providing an easy to compute point estimator of a slope coefficient which can be interpreted as a local average treatment effect late however the 2sls estimator does not measure the value of other useful treatment effect parameters without invoking untenable restrictions the nonparametric instrumental variable iv model has the advantage of being weakly restrictive so more generally applicable but it usually delivers set identification nonetheless it can be used to consistently estimate bounds on many parameters of interest including for example average treatment effects we illustrate using data from angrist evans 1998 and study the effect of family size on female employment

monopsony power in migrant labor markets evidence from the united arab emirates by exploiting a reform in the united arab emirates that relaxed restrictions on employer transitions we provide new estimates of the monopsony power of firms over migrant workers our results show that the reform increased incumbent migrants earnings and firm retention this occurs despite an increase in employer transitions and is driven by a fall in country exits while the outcomes of incumbents improved the reform decreased demand for new migrants and lowered their earnings these results are consistent with a model of monopsony in which firms face upward sloping labor supply curves for both new recruits in source countries and incumbent migrants

a model of the impact of reimbursement schemes on health plan choice flat capitation uniform prospective payments makes enrolling healthy enrollees profitable to health plans plans with relatively generous benefits may attract the sick and fail through a premium spiral we simulate a model of idealized managed competition to explore the effect on market performance of alternatives to flat capitation such as severity adjusted capitation and reduced supply side cost sharing in our model flat capitation causes severe market problems severity adjustment and to a lesser extent reduced supply side cost sharing improve market performance but outcomes are efficient only in cases in which people bear the marginal costs of their choices