Social and Behavioral Sciences Commons^™

Explicit Versus Implicit Income, Thomas J. Kniesner, James P. Ziliak

Center for Policy Research

By supplementing income explicitly through payments or implicitly through taxes collected, income-based taxes and transfers make disposable income less variable. Because disposable income determines consumption, policies that smooth disposable income also create welfare improving consumption insurance. With data from the Panel Study of Income Dynamics we find that annual consumption variation is reduced by almost 20 percent due to explicit and implicit income smoothing. Consumption insurance is as important economically as private health or automobile insurance. Although taxes have become an increasingly important source of consumption insurance, the 2001 income-tax reform legislation should have little effect on implicit consumption insurance.

Have 401(K)S Raised Household Savings? Evidence From The Health And Retirement Study, Gary V. Engelhart

Center for Policy Research

The most popular tax subsidy to household saving in the United States is the 401(k)-type pension arrangement, which subsidizes saving through income-tax deferral on wages and salary dedicated to retirement saving and through investment accrual at the pre-tax interest rate. Although enabled by legislation in 1978, 401(k) plans effectively were not adopted until the Internal Revenue Service issued clarifying rules in 1981. Since then, they have grown remarkably and become the primary vehicle for retirement saving. In 1996, 33 percent of all private pension assets, 33 percent of all pension plans, and 45 percent of all active pension participants were …

Pre-Retirement Lump-Sum Pension Distributions And Retirement Income Security: Evidence From The Health And Retirement Study, Gary V. Engelhart

Center for Policy Research

This paper uses data from the 1992 and 1998 Waves of the Health and Retirement Study (HRS) to examine the extent of retirement wealth erosion from pre-retirement lump-sum distributions. There is little evidence that spent distributions have resulted in significant pension leakage. If spent distributions had been rolled over into a tax-qualified plan instead, they would have represented in present value between 5 and 11 percent of pension and Social Security wealth for the median household that spent a distribution. However, one-quarter of the households that spent distributions—which is 2.25 percent of all households age 51 to 61—could have increased …

Unfinished Business: Inadequate Health Coverage For Privately Insured, Seriously Ill Children, Nancy Swigonski, Eleanor D. Kinney, Deborah A. Freund, Thomas J. Kniesner

Center for Policy Research

During the 1980s and 1990s there were great increases of health insurance coverage for poor children through the Children’s Health Insurance Program (CHIP) and extended Medicaid eligibility. Problems remain for the small number of children with serious medical conditions whose care is a high proportion of total health care expenditures on children. We report on the adequacy of health insurance coverage for a sample of children with serious and rare illnesses treated at the single tertiary care pediatric hospital in Indiana. One-third of privately insured children in our data had inadequate insurance. Compared to families with inadequate health insurance families …

Determinants Of Medical Costs Following A Diagnosis Of Depression, Regina H. Powers, Thomas J. Kniesner, Thomas W. Croghan

Center for Policy Research

Objective: Assess the determinants of medical costs for depressed individuals.

Method: Using medical insurance claims for a population of depressed individuals with employer provided insurance, we estimated multivariate models of the costs for general medical care, exclusive of costs for mental health services, following diagnosis. Explanatory variables included provider choice (psychiatrist or non-physician mental health specialist), treatment choice (medication, psychotherapy, or combination treatment); treatment adequacy as defined by APA guidelines; characteristics of depression symptoms and severity; and other demographic characteristics.

Results: On average, there were increases in the costs for general medical services in the year following diagnosis of a …

Intergenerational Labor Market And Welfare Consequences Of Poor Health, Thomas J. Kniesner, Anthony T. Losasso

Center for Policy Research

Our research provides new econometric evidence concerning partial economic risk sharing between a frail elderly parent and an adult child. We estimate a jointly determined limited dependent variables system explaining the parent’s entry into a nursing home, the adult child’s visits to the parent, and the adult child’s labor supplied. The time allocation of adult sons is unaffected by a parent’s frail health. Adult daughters who visit a frail elderly parent daily decrease their annual labor supplied by about 1,000 hours annually, largely through labor force non-participation. The implied welfare loss to the daughter from a frail elderly parent in …

Intergenerational Labor Market And Welfare Consequences Of Poor Health, Thomas J. Kniesner, Anthony T. Losasso

Center for Policy Research

Our research provides new econometric evidence concerning partial economic risk sharing between a frail elderly parent and an adult child. We estimate a jointly determined limited dependent variables system explaining the parent’s entry into a nursing home, the adult child’s visits to the parent, and the adult child’s labor supplied. The time allocation of adult sons is unaffected by a parent’s frail health. Adult daughters who visit a frail elderly parent daily decrease their annual labor supplied by about 1,000 hours annually, largely through labor force non-participation. The implied welfare loss to the daughter from a frail elderly parent in …

The Role Of Microsimulation In Longitudinal Data Analysis, Douglas A. Wolf

Center for Policy Research

The term “microsimulation” has been linked to a range of tools and techniques that are finding growing use in empirical social science applications. This paper considers one such area, namely the potential for microsimulation to serve the needs of the data analyst, in contrast to the more common use of microsimulation by the model user. Furthermore, the focus is on longitudinal rather than cross-sectional data analysis. The paper identifies several types of longitudinal data modeling approaches in which microsimulation is particularly relevant, suggesting algorithms with which to conduct such microsimulations. Microsimulation can be used to extend the range of inferences …

Nominal Loss Aversion, Housing Equity Constraints, And Household Mobility: Evidence From The United States, Gary Engelhardt

Center for Policy Research

This paper exploits the significant recent variation in United States house prices to empirically examine the effect on housing equity constraints and nominal loss aversion on household mobility. The analysis uses unique, detailed data from 1985-1996 on household characteristics, mobility, and wealth from the National Longitudinal Survey of Youth (NLSY79) matched with house price data from 149 metropolitan areas to estimate semiparametric proportional hazard models of intra- and inter-metropolitan mobility. There are five principal findings: (1) household intra-metropolitan own-to-own mobility responds differently to nominal housing losses than to gains; (2) nominal loss aversion is significantly less pronounced in intra-metropolitan own-to-rent …

United States Poverty In A Cross-National Context, Timothy Smeeding, Lee Rainwater, Gary Burtles

Center for Policy Research

In this paper we use cross-national comparisons made possible by the LIS to examine America’s experience in maintaining a low poverty rate. We compare the effectiveness of United States antipoverty policies to that of similar polices elsewhere in the industrialized world. If lessons can be learned from cross-national comparisons, there is much that can be learned about antipoverty policy by American voters and policymakers. The United States has one of the highest poverty rates of all the countries participating in the LIS, whether poverty is measured using comparable absolute or relative standards for determining who is poor. Although the high …

Private Philanthropy And The Economics Of Public Radio, Arthur C. Brooks

Center for Policy Research

Public radio in the United States receives both direct and indirect government funding. Direct subsidies come in the form of lump-sum and matching grants, while indirect subsidies proceed from tax revenues foregone on deductible private donations. Each of these sources of government money impacts charitable giving to public radio. This paper estimates both of these effects, using data on a national sample of public radio stations in the United States from 1990-96. I find that public funding to stations has a positive impact on private giving, but this impact rapidly decreases as the level of government subsidies increases, ultimately becoming …

Geography, Industrial Organization, And Agglomeration Heteroskedasticity Models With Estimates Of The Variances Of Foreign Exchange Rates, Chihwa Kao

Center for Policy Research

This paper proposes a robust estimation procedure, the bounded influence estimate (BIS), which is robust against departure from the conditional normality of the autoregressive conditional heteroskedasticity (ARCH) models to describe the behavior of exchange rates. First, the BIE identifies the additive outliers (AO, e.g., Fox 1972) caused by abnormal information arrivals which may be triggered by changes in domestic policies and international shocks. Identification of outliers allows us to analyze the major economic and political factors that contribute directly to the dramatic changes in exchange rates. Second, the performance of the BIE is compared with the maximum likelihood estimate (MLE) …

Does School District Consolidation Cut Costs?, William Duncombe, John Yinger

Center for Policy Research

Over the last 50 years, consolidation has dramatically reduced the number of school districts in the United States, and state governments still recommend consolidation, especially in rural school districts, as a way to improve school district efficiency. However, state policies encouraging consolidation are often challenged on the grounds that they do not lead to cost savings and instead foster learning environments that harm student performance. Existing evidence on this topic comes largely from educational cost functions, which indicate that instructional and administrative costs are far lower in a district with 3,000 pupils than in a district with 100 pupils. However, …

Can Policy Changes Be Treated As Natural Experiments? Evidence From State Excise Taxes, Jeffrey D. Kubik, John R. Moran

Center for Policy Research

An important issue in public policy analysis is the potential endogeneity of the policies under study. If policy changes constitute responses on the part of political decision-makers to changes in a variable of interest, then standard analyses that treat policy changes as natural experiments may yield biased estimates of the impact of the policy (Besley and Case 2000). We examine the extent to which such political endogeneity biases conventional fixed effects estimates of behavioral parameters by identifying the elasticities of demand for cigarettes and beer using the timing of state legislative elections as an instrument for changes in state excise …

Fixing New York's State Education Aid Dinosaur: A Proposal, John Yinger

Center for Policy Research

New York State provides aid to local schools through a confusing maze of aid programs that are, according to many commentators, unfair to the neediest school districts, often defined as those with many students who are poor or otherwise "at risk." For example, New York City, which, by any measure, is one of the neediest districts, currently receives less aid per pupil than the average district in the state. On January 9, 2001, in the case of Campaign for Fiscal Equity vs. State of New York (719 N.Y.S2d 475, 150 Ed. Law Rep. 834), the New York State Supreme Court …