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Working Paper
Family and Government Insurance: Wage, Earnings, and Income Risks in the Netherlands and the U.S.
We document new facts about risk in male wages and earnings, household earnings, and pre- and post-tax income in the Netherlands and the United States. We find that, in both countries, earnings display important deviations from the typical assumptions of linearity and normality. Individual-level male wage and earnings risk is relatively high at the beginning and end of the working life, and for those in the lower and upper parts of the income distribution. Hours are the main driver of the negative skewness and, to a lesser extent, the high kurtosis of earnings changes. Even though we find no ...
Working Paper
Preventive vs. Curative Medicine: A Macroeconomic Analysis of Health Care over the Life Cycle
This paper studies differences in health care usage and health outcomes between low- and high-income individuals. Using data from the Medical Expenditure Panel Survey (MEPS) I find that early in life the rich spend significantly more on health care, whereas from middle to very old age medical spending of the poor surpasses that of the rich by 25%. In addition, low-income individuals are less likely to incur any medical expenditures in a given year, yet, when they do, their expenses are more likely to be extreme. To account for these facts, I develop and estimate a life-cycle model of two ...
Working Paper
Racial Inequality in Unemployment Insurance Receipt and Take-Up
This paper studies differences in receipt and take-up of unemployment insurance (UI) benefits among White and Black individuals. We combine state-level UI regulations with data containing detailed information on individuals’ work history and UI receipt. Black individuals who separate from a job are 24% less likely to receive UI than White individuals. The UI receipt gap stems primarily from lower take-up of UI benefits among likely eligible individuals, as opposed to differences in benefit eligibility. Statistical decompositions indicate that about one-half of the take-up gap is explained ...
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
Preventive vs. Curative Medicine: A Macroeconomic Analysis of Health Care over the Life Cycle
This paper studies differences in health care usage and health outcomes between low- and high-income individuals. Using data from the Medical Expenditure Panel Survey (MEPS) I find that early in life the rich spend significantly more on health care, whereas from midway through life until very old age the medical spending of the poor dramatically exceeds that of the rich. In addition, low-income individuals are less likely to incur any medical expenditures in a given year, yet, when they do incur medical expenditures, the amounts are more likely to be extreme. To account for these facts, I ...
Working Paper
The Macroeconomic Effects of Universal Basic Income Programs
What are the consequences of a nationwide reform of a transfer system based on means-testing toward one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current US income security system with a universal basic income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of the labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the US ...
Working Paper
Optimal Social Insurance and Rising Labor Market Risk
This paper analyzes the optimal response of the social insurance system to a rise in labor market risk. To this end, we develop a tractable macroeconomic model with risk-free physical capital, risky human capital (labor market risk) and unobservable effort choice affecting the distribution of human capital shocks (moral hazard). We show that constrained optimal allocations are simple in the sense that they can be found by solving a static social planner problem. We further show that constrained optimal allocations are the equilibrium allocations of a market economy in which the government ...
Working Paper
Aggregate Dynamics in Mirrlees Economies: The Case of Persistent Shocks
I consider a neoclassical growth model with endogenous labor supply in which agents have private information about their idiosyncratic value of leisure. A key assumption is that these shocks follow a persistent stochastic process over time. For this economy I solve the economy-wide mechanism design problem of a social planner that seeks to maximize the welfare of agents, subject to incentive compatibility, promise-keeping, threat-keeping, and aggregate feasibility constraints. When preferences over consumption and leisure are logarithmic, I obtain a strong analytical result: All macroeconomic ...
Working Paper
Business Cycle Fluctuations in Mirrlees Economies: The Case of i.i.d. Shocks
I consider a real business cycle model in which agents have private information about the i.i.d. realizations of their value of leisure. For the case of logarithmic preferences I provide an analytical characterization of the solution to the associated mechanism design problem. Moreover, I show a striking irrelevance result: That the stationary behavior of all aggregate variables are exactly the same in the private information economy as in the full information case. Numerical simulations indicate that the irrelevance result approximately holds for more general CRRA preferences.
Working Paper
Who is screened out of social insurance programs by entry barriers? Evidence from consumer bankruptcies
Entry barriers into social insurance programs will be effective screening devices if they cause only those individuals receiving higher benefits from a program to participate in that program. We find evidence for this by using plausibly exogenous variations in travel-related entry costs into the Canadian consumer bankruptcy system. Using detailed balance sheet and travel data, we find that higher travel-related entry costs reduce bankruptcies from individuals with lower financial benefits of bankruptcy (unsecured debt discharged, minus secured assets forgone). When compared across filers, ...