Does Health Insurance Coverage Lead to Better Health and Educational Outcomes? Evidence from Rural China

Using 2006 China Agricultural Census (CAC), we examine whether the introduction of the New Cooperative Medical System (NCMS) has affected child mortality, maternal mortality, and school enrollment of the 6-16 years olds. Our data cover 5.9 million people living in eight low-income rural counties, of which four adopted the NCMS by 2006 and four did not adopt it until 2007. Raw data suggest that enrolling in NCMS is associated with better school enrollment and lower mortality of young children and pregnant women. However, using a difference-in-difference propensity score method, we find most of these differences are driven by the endogenous introduction and take-up of NCMS, and out method overcomes classical propensity score matching's failure to address the selection bias. While the NCMS does not affect child mortality and maternal mortality, it does help improve the school enrollment of six-year-olds.

Does Price Reveal Poor-Quality Drugs? Evidence from 17 Countries

Focusing on 8 drug types on the WHO-approved medicine list, we constructed an original dataset of 899 drug samples from 17 low- and median-income countries and tested them for visual appearance, disintegration, and analyzed their ingredients by chromatography and spectrometry. Fifteen percent of the samples fail at least one test and can be considered substandard. After controlling for local factors, we find that failing drugs are priced 13.6-18.7% lower than non-failing drugs but the signaling effect of price is far from complete, especially for non-innovator brands. The look of the pharmacy, as assessed by our covert shoppers, is weakly correlated with the results of quality tests. These findings suggest that consumers are likely to suspect low quality from market price, non-innovator brand and the look of the pharmacy, but none of these signals can perfectly identify substandard and counterfeit drugs. Indeed, many cheaper non-innovator products pass all quality tests, and are genuine generic drugs.

That's News to Me! Information Revelation in Professional Certification Markets

Using sportscard grading as an example, we employ field experiments to investigate empirically the informational role of professional certifiers. In the past 20 years, professional grading of sportscards has evolved in a way that provides a unique opportunity to measure the information provision of a monopolist certifier and that of subsequent entrants. Empirical results suggest three patterns: the grading certification provided by the first professional certifier offers new information to inexperienced traders but adds little information to experienced dealers. This implies that the certification may reduce the information asymmetry between informed and uninformed parties. Second, compared with the incumbent, new entrants adopt more precise signals and use finer grading cutoffs to differentiate from the incumbent. Third, our measured differentiated grading cutoffs map consistently into prevailing market prices, suggesting that the market recognizes differences across multiple grading criteria.

Games Daughters and Parents Play: Teenage Childbearing, Parental Reputation, and Strategic Transfers

In this paper, we examine the empirical implications of reputation formation using a game-theoretic model of intra-familial interactions. We consider parental reputation in repeated two-stage games in which daughters' decision to have a child as a teenager and the willingness of parents to continue to house and support their daughters given their decisions. Drawing on the work of Milgrom and Roberts (1982) and Kreps and Wilson (1982) on reputation in repeated games, we show that parents have, under certain conditions, the incentive to penalize teenage (and typically out-of-wedlock) childbearing of older daughters, in order to get the younger daughters to avoid teenage childbearing. The two key empirical implications of this model is that the likelihood of teenage childbearing and parental transfers to a daughter who had a teen birth will decrease with the number of the daughter's sisters at risk. We test these two implications, using data from the National Longitudinal Survey of Youth, 1979 Cohort (NLSY79), exploiting the availability of repeated observations on young women (daughters) and of observations on multiple daughters (sisters) available in this data. Controlling for daughter- and family-specific fixed effects, we find evidence of differential parental financial transfer responses to teenage childbearing by the number of the daughter's sisters and brothers at risk.

Quality Disclosure and Certification: Theory and Practice

This essay reviews the theoretical and empirical literature on quality disclosure and certification. After comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure, we address three key theoretical issues: (i) Why don't sellers voluntarily disclose through a process of "unraveling?" (ii) When should government mandate disclosure? and (iii) Do certifiers necessarily report unbiased and accurate information? We further review empirical evidence on these issues, with a particular focus on healthcare, education, and finance. The empirical review covers quality measurement, the effect of third party disclosure on consumer choice and seller behavior, as well as the economics of certifiers.

Learning by Doing with Asymmetric Information: Evidence from Prosper.com

Using peer-to-peer (P2P) lending as an example, we show that learning by doing plays an important role in alleviating the information asymmetry between market players. Although the P2P platform (Prosper.com) discloses part of borrowers’ credit histories, lenders face serious information problems because the market is new and subject to adverse selection relative to offline markets. We find that early lenders did not fully understand the market risk but lender learning is effective in reducing the risk over time. As a result, the market excludes more and more sub-prime borrowers and evolves towards the population served by traditional credit markets.

Peer Migration in China

We aim to quantify the role of social networks in job-related migration. With over 130 million rural labors migrating to the city each year, China is experiencing the largest internal migration in the human history. Using instrumental variables in the 2006 China Agricultural Census, we find that a 10-percentage-point increase in the migration rate of co-villagers raises one's migration probability by 7.27 percent points, an effect comparable to an increase of education by 7-8 years. Evidence suggests that most of this effect is driven by co-villagers helping each other in moving cost and job search at the destination.

The Promise of Beijing: Evaluating the Impact of the 2008 Olympic Games on Air Quality

To prepare for the 2008 Olympic Games, China adopted a number of radical measures to improve air quality. Using officially reported air pollution index (API) from 2000 to 2009, we show that these measures improved the API of Beijing during and after the Games, but 60% of the effect faded away by the end of October 2009. Since the credibility of API data has been questioned, an objective and indirect measure of air quality at a high spatial resolution – aerosol optimal depth (AOD), derived using the data from the NASA satellites – was analyzed and compared with the API trend. The analysis confirms that the improvement was real but temporary and most improvement was attributable to plant closure and traffic control. Our results suggest that it is possible to achieve real environmental improvement in an authoritarian regime but the magnitude of the effect and how long it lasts depend on the political motivation behind the policy interventions.

Direct-To-Consumer Ads Are Misleading: Concise Statements of Effectiveness Should Be Required

The issue of required disclaimers in direct-to-consumer (DTC) advertising of pharmaceuticals boiled to the surface in May 2019, when the Centers for Medicare and Medicaid Services (CMS) published a final rule requiring the disclosure of a drug’s price in DTC ads. The idea is not a new one––the American Medical Association (AMA) adopted a resolution recommending just such a required disclosure in June 2017. For a number of reasons, even if the proposal is implemented it may not have much effect. Consumers may see price as an indicator of effectiveness, just as a high-priced car is expected to be superior to a lower-priced car, and insurance coverage may reduce patients’ concerns about a high-price for a drug. The significance of drug prices to consumers is further complicated both by the “market-distorting effects of third-party payors” and the requirement for consultation with and prescription by a licensed physician whose decisions may also be impacted by third-party payors, but is not necessarily affected by the list prices of drugs. However, the thesis of this article is not that disclosing prices in DTC ads is a bad idea, but that providing consumers with information about how effective advertised drugs are likely to be for them would provide information that patients need regardless of their insurance or financial status. Additionally, it would likely have a greater impact on the pharmaceutical marketplace. If the problem with DTC ads, as the AMA stated in its proposal to require price disclosures, is that “patients pressure physicians to prescribe certain medications that cost more than lower-cost alternatives and are not necessarily as efficacious,” then requiring DTC ads to provide consumers with clear information about the effectiveness of the advertised drug would be an even more powerful solution. There is a growing awareness of the need to require disclosures of expected effectiveness in pharmaceutical DTC marketing. Currently, consumers are told about the general condition for which a drug is used: e.g. “Drug X is approved for the treatment of major depressive disorder,” or “Drug X has been proven effective for the treatment of depression”; but rarely are consumers given information about the average benefit achieved in clinical trials or in post-market studies. This is a particular problem in DTC advertising for prescription pharmaceuticals. An article, in The New York Times by Elizabeth Rosen, highlighted the problem of DTC ads that are likely to mislead consumers about a drug’s effectiveness and provided this example: “Another ad promoted Jublia, a new topical drug for toenail fungus that costs thousands of dollars for a full course of treatment. Complete cure rates in studies—under 20 percent after 48 weeks of use—aren’t mentioned in the ads.” While the problem is becoming well known, as the New York Times article illustrates, the FDA regulation of pharmaceutical marketing is significantly constrained by the First Amendment’s protection of commercial speech, which would almost certainly make a ban on DTC pharmaceutical ads unconstitutional. This article provides an approach to FDA regulation of DTC ads that would address the problem within the limits of the First Amendment’s protection for commercial speech and provide patients with the information they need most to sort through the glossy promotional advertisements created by pharmaceutical companies and their ad agencies

Wintertime for Deceptive Advertising?

Casual empiricism suggests that deceptive advertising about product quality is prevalent, and several classes of theories explore its causes and consequences. We provide unusually sharp empirical evidence on its extent, mechanics, and dynamics. Ski resorts self-report substantially more natural snowfall than comparable government sources. The difference is more pronounced on weekends, despite third-party evidence that snowfall is uniform throughout the week—as one would expect given plausibly greater returns to exaggeration on weekends. Exaggeration is greater for resorts that plausibly reap greater benefits from it: those with expert terrain and those not offering money back guarantees. (JEL D83, L15, L83, M37, Z31