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Discussion Paper
Impacts of COVID-19: Mitigation Efforts versus Herd Immunity
The rapid spread of COVID-19 is having devastating effects on the global economy. With death curves beginning to bend, governments will soon need to determine when and how to relax lockdown measures. The crucial question is: what are the public health consequences of reopening the economy? In this article, we argue that the observed decline in daily deaths could be due to two scenarios: social distancing measures and herd immunity. Both the widely used SIR model and the data collected thus far cannot distinguish these two scenarios. Such an identification problem generates a large degree of ...
Journal Article
Did Substance Abuse during the Pandemic Reduce Labor Force Participation?
The labor force participation rates of prime-age US workers dropped in March 2020—the start of the COVID-19 pandemic—and have still not fully recovered. At the same time, deaths from substance abuse were elevated during the pandemic relative to trend, indicating the number of people abusing substances may have increased, and those who abuse opioids and crystal methamphetamine have lower labor force participation rates than those who don’t abuse these substances. Could increased substance abuse during the pandemic be a factor contributing to the fall in labor force participation? ...
Journal Article
Impacts of COVID-19: Mitigation Efforts versus Herd Immunity
The rapid spread of COVID-19 is having devastating effects on the global economy. Governments around the world have been forced to pursue lockdown policies in an attempt to stem the spread of this deadly disease and bend the death curve. With death curves beginning to bend, governments will soon need to determine when and how to relax lockdown measures. The crucial question is: what are the consequences of reopening the economy? In this article, we address this question by studying both the model and the data and discuss the challenges we face moving forward.
Working Paper
Old, sick, alone, and poor: a welfare analysis of old-age social insurance programs
Poor health, large acute and long-term care medical expenses, and spousal death are significant drivers of impoverishment among retirees. We document these facts and build a rich, overlapping generations model that reproduces them. We use the model to assess the incentive and welfare effects of Social Security and means-tested social insurance programs such as Medicaid and food stamp programs, for the aged. We find that U.S. means-tested social insurance programs for retirees provide significant welfare benefits for all newborn. Moreover, when means-tested social insurance benefits are of the ...
Working Paper
Measuring the welfare gain from personal computers: a macroeconomic approach
The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero, implying that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated and estimated using standard national income and product account data. The welfare gain from the introduction of ...
Working Paper
The Evolution of Health over the Life Cycle
We construct a unified objective measure of health status: the frailty index, defined as the cumulative sum of all adverse health indicators observed for an individual. First, we show that the frailty index has several advantages over self-reported health status, particularly when studying health dynamics. Then we estimate a stochastic process for frailty dynamics over the life cycle. We find that the autocovariance structure of frailty in panel data strongly supports a process that allows the conditional variance of frailty shocks to increase with age. Our frailty measure and dynamic process ...
Working Paper
Old, Frail, and Uninsured: Accounting for Puzzles in the U.S. Long-Term Care Insurance Market
Half of U.S. 50-year-olds will experience a nursing home stay before they die, and one in ten will incur out-of-pocket long-term care expenses in excess of $200,000. Surprisingly, only about 10% of individuals over age 62 have private long-term care insurance (LTCI). This paper proposes a quantitative equilibrium optimal contracting model of the LTCI market that features screening along the extensive margin. Frail and/or poor risk groups are ordered a single contract of no insurance that we refer to as a rejection. According to our model, rejections are the main reason that LTCI take-up rates ...
Working Paper
The impact of medical and nursing home expenses and social insurance
We consider a life-cycle model with idiosyncratic risk in earnings, out-of-pocket medical and nursing home expenses, and survival. Partial insurance is available through welfare, Medicaid, and social security. Calibrating the model to the United States, we show that (1) savings for old-age, out-of-pocket expenses account for 13.5 percent of aggregate wealth, half of which is due to nursing home expenses; (2) cross-sectional out-of-pocket nursing home risk accounts for 3 percent of aggregate wealth and substantially slows down wealth decumulation at older ages; (3) the impact of medical and ...
Working Paper
Four Stylized Facts about COVID-19
We document four facts about the worldwide COVID-19 pandemic that are relevant for those studying the impact of nonpharmaceutical interventions (NPIs) on COVID-19 transmission. First, across all countries and U.S. states that we study, the growth rates of daily deaths from COVID-19 fell from a wide range of initially high levels to levels close to zero within 20–30 days after each region experienced 25 cumulative deaths. Second, after this initial period, growth rates of daily deaths have hovered around zero or below everywhere in the world. Third, the cross section standard deviation of ...
Working Paper
How Important Is Health Inequality for Lifetime Earnings Inequality?
Using a dynamic panel approach, we provide empirical evidence that negative health shocks reduce earnings. The effect is primarily driven by the participation margin and is concentrated in less educated individuals and those with poor health. We build a dynamic, general equilibrium, life cycle model that is consistent with these findings. In the model, individuals whose health is risky and heterogeneous choose to either work, or not work and apply for social security disability insurance (SSDI). Health affects individuals’ productivity, SSDI access, disutility from work, mortality, and ...