An Analysis of the Rebate Proposal In the Announced Stimulus Deal

The principal weakness of the new rebate design is that it would provide smaller rebates to low- and moderate-income working families than to families at higher income levels, despite the fact that rebates provided to low- and moderate-income families are the most effective as stimulus. It also may be noted that the proposal does not cover the 22 million mostly low-income households who do not file income tax returns. It is nearly impossibly to reach such households through a tax rebate, but millions of these households could have been reached through a temporary increase in food stamp benefits. The food stamp provision, however, was dropped from the stimulus package

Fewer Than 60 Percent of Working Households Benefit Fully From President's Tax Rebate

The centerpiece of the President's economic stimulus proposal reportedly is a tax rebate that would be provided by temporarily reducing the 10 percent income tax rate to zero. The plan has been described as featuring a rebate of $800 for individuals and$1,600 for couples. This description, however, is misleading. Only those filers with incomes high enough to put them in the 15 percent tax bracket or a higher tax bracket could qualify for the full rebate, while most low- and moderate-income households would receive no rebate at all. This approach would not only deny help to the individuals hardest hit by a weakening economy; it would also make the rebate considerably less effective than it could be as economic stimulus

Moral Hazard in Health Insurance: How Important Is Forward Looking Behavior?

We investigate whether individuals exhibit forward looking behavior in their response to the non-linear pricing common in health insurance contracts. Our empirical strategy exploits the fact that employees who join an employer-provided health insurance plan later in the calendar year face the same initial ("spot") price of medical care but a higher expected end-of-year ("future") price than employees who join the same plan earlier in the year. Our results reject the null of completely myopic behavior; medical utilization appears to respond to the future price, with a statistically significant elasticity of medical utilization with respect to the future price of -0.4 to -0.6. To try to quantify the extent of forward looking behavior, we develop a stylized dynamic model of individual behavior and calibrate it using our estimated behavioral response and additional data from the RAND Health Insurance Experiment. Our calibration suggests that the elasticity estimate may be substantially smaller than the one implied by fully forward-looking behavior, yet it is sufficiently high to have an economically significant effect on the response of annual medical utilization to a non-linear health insurance contract. Overall, our results point to the empirical importance of accounting for dynamic incentives in analyses of the impact of health insurance on medical utilization.

Essays in applied microeconomics

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012.Cataloged from PDF version of thesis.Includes bibliographical references.This dissertation consists of three chapters on topics in applied microeconomics. In the first chapter. I investigate whether voters are more likely to support additional spending on local public services when they perceive current service quality to be high. My empirical strategy exploits discontinuities in the Texas school ratings formula that create quasi-random variation in perceptions about school quality. I find that receiving an "exemplary" versus a "recognized" rating increases support for a school district's bond measures by about 10 percentage points. Voters respond to the level of a district's rating. not just to whether the district has improved or slipped. I develop and implement a test for whether these patterns of voter behavior lead to efficient outcomes; however, the results are inconclusive. The second chapter. written jointly with Liran Einav, Amy Finkelstein, and Mark Cullen. investigates whether individuals exhibit forward looking behavior in their response to the nonlinear pricing common in health insurance contracts. Our empirical strategy exploits the fact that employees who join an employer-provided health insurance plan later in the calendar year face the same initial price of medical care but a higher expected end-of-year price than employees who join the same plan earlier in the year. Our results reject the null of completely myopic behavior; medical utilization appears to respond to the future price, with a statistically significant elasticity of medical utilization with respect to the future price of -0.4 to -0.6. To try to quantify the extent of forward looking behavior., we develop a stylized dynamic model of individual behavior and calibrate it using our estimated behavioral response and additional data from the RAND Health Insurance Experiment. Our calibration suggests that the elasticity estimate may be substantially smaller than the one implied by fully forward-looking behavior, yet it is sufficiently high to have an economically significant effect on the response of annual medical utilization to a non-linear health insurance contract. Overall. our results point to the empirical importance of accounting for dynamic incentives in analyses of the impact of health insurance on medical utilization. In the third chapter. I exploit a discontinuity in federal financial aid rules at age 24 to estimate the effect of financial aid on college enrollment. school choice. and persistence and degree completion rates. Undergraduate students who are not married and do not have children are classified as "dependent" or "independent" for purposes of federal financial aid based on whether they have turned 24 as of January 1 of the "award year." Independent students qualify for additional grant aid and are eligible to take out much larger federal loans. Using data from the National Postsecondary Student Aid Study and the Beginning Postsecondary Students Longitudinal Study. I show that average grant aid per student increases by about $1.100. or 55%. at age 24. while 12% of students take advantage of the higher federal loan limits. Estimates of the effects of additional aid on enrollment, persistence. and degree completion are inconclusive; while not statistically significant. they do not allow me to rule out sizable effects. I do find evidence of an increase in enrollment at for-profit colleges. concentrated among students whose parents are not college graduates.by Aviva Ronit Aron-Dine.Ph.D

Moral Hazard in Health Insurance: Do Dynamic Incentives Matter?

Using data from employer-provided health insurance and Medicare Part D, we investigate whether health care 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 health care 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.National Institute on Aging (R01 AG032449)National Science Foundation (U.S.). (Grant SES-0643037)John D. and Catherine T. MacArthur Foundation. Network on Socio-economic Status and HealthAluminum Company of AmericaUnited States. Social Security Administration (grant 5 RRC08098400-04-00 to the NBER)Retirement Research Consortium (U.S.