The effect of disability insurance receipt on labor supply
This paper estimates the effect of the Disability Insurance program on labor supply. We find that 30% of denied applicants and 15% of allowed applicants work several years after a disability determination decision. The earnings elasticity with respect to the after tax wage is 0.8. However, the labor supply of those over age 55, college graduates, and those with mental illness is not sensitive to allowance of benefits.
Medicaid insurance in old age
Medicaid was primarily designed to protect and insure the poor against medical shocks. Yet, poorer people tend to live shorter lifespans and incur lower medical expenses before death than richer people. Taking these and other important dimensions of heterogeneity into account, and carefully modeling key institutional aspects, we estimate a structural model of savings and endogenous medical expenses to assess the costs and benefits of Medicaid for single retirees. ; We show that even higher-income retirees benefit from Medicaid, if they live long enough for their resources to be depleted by ...
The effect of Disability Insurance receipt on labor supply: a dynamic analysis
This paper estimates the effect of Disability Insurance receipt on labor supply, accounting for the dynamic nature of the application process. Exploiting the effectively random assignment of judges to disability insurance cases, we use instrumental variables to address the fact that those allowed benefits are a selected sample. We find that benefit receipt reduces labor force participation by 26 percentage points three years after a disability determination decision when not considering the dynamic nature of the applications process. OLS estimates are similar to instrumental variables ...
Differential mortality, uncertain medical expenses, and the saving of elderly singles
People have heterogenous life expectancies: women live longer than men, rich people live longer than poor people, and healthy people live longer than sick people. People are also subject to heterogenous out-of-pocket medical expense risk. We show that all of these dimensions of heterogeneity are large for the elderly. Can these factors explain their lack of asset decumulation even at very advanced ages and the high saving rate of the income-rich elderly? We answer this question in two steps. We first estimate the uncertainty about mortality and outof pocket medical expenditures as functions ...
The effects of progressive taxation on labor supply when hours and wages are jointly determined
This paper extends a standard intertemporal labor supply model to account for progressive taxation as well as the joint determination of hourly wages and hours worked. We show, qualitatively and quantitatively, that these two factors have important implications for estimating the intertemporal elasticity of substitution. Furthermore, we show how to use this corrected parameter to interpret the labor supply response to a tax change. Failure to account for wage-hours ties within a progressive tax system leads to an hours response to a change in marginal tax rates that may be biased downwards by ...
Why do the elderly save? the role of medical expenses
This paper constructs a rich model of saving for retired single people. Our framework allows for bequest motives and heterogeneity in medical expenses and life expectancies. We estimate the model using AHEAD data and the method of simulated moments. The data show that out-of-pocket medical expenses rise quickly with both age and permanent income. For many elderly people the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests. Social insurance programs such as Medicaid rationalize the low asset holdings of the ...
On the distribution and dynamics of health costs
Using data from the Health and Retirement Survey (HRS) and Assets and Health Dynamics of the Oldest Old (AHEAD), this paper presents estimates of the stochastic process that determines both the distribution and dynamics of health costs. We find that the data generating process for health costs is well represented by an ARMA(1,1). Furthermore, innovations to this process are close to lognormally distributed. In any given year, .1% of our sample receives a health cost shock that costs at least $80,000 in present value. Lastly, we discuss the accuracy of numerical solutions when integrating over ...
Firm Dynamics and the Minimum Wage: A Putty-Clay Approach
We document two new facts about the market-level response to minimum wage hikes: firm exit and entry both rise. These results pose a puzzle: canonical models of firm dynamics predict that exit rises but that entry falls. We develop a model of firm dynamics based on putty-clay technology and show that it is consistent with the increase in both exit and entry. The putty-clay model is also consistent with the small short-run employment effects of minimum wage hikes commonly found in empirical work. However, unlike monopsony-based explanations for small short-run employment effects, the model ...
Life expectancy and old age savings
Rich people, women, and healthy people live longer. We document that this heterogeneity in life expectancy is large. We use an estimated structural model to assess the impact of life expectancy variation on the elderly?s savings. We find that the differences in life expectancy related to observable factors such as health, gender, and income have large effects on savings, and that these factors contribute by similar amounts. We also show that the risk of outliving one?s expected lifespan has a large effect on the elderly?s saving behavior.
The minimum wage and restaurant prices
Using both store-level and aggregated price data from the food away from home component of the Consumer Price Index survey, we show that restaurant prices rise in response to an increase in the minimum wage. These results hold up when using several different sources of variation in the data. We interpret these findings within a model of employment determination. The model implies that minimum wage hikes cause employment to fall and prices to rise if labor markets are competitive but potentially cause employment to rise and prices to fall if labor markets are monopsonistic. Therefore, our ...