The demand for health, alcohol abuse, and labor market outcomes: a longitudinal study

Becker and Murphy (1988) presented a rational addiction theory to rationalize the behavior of addiction. This dissertation extends rational addiction theory to examine the hypothesis of rational addiction and the long-term impact of addiction on labor productivity and labor supply. The theoretical model explicitly considers investment in health, drug consumption, and labor supply as joint decision variables, and treats wage as the outcome of these decisions. A simultaneous framework is empirically estimated to test the forward-looking hypothesis and the government policies are evaluated by simulation. The data set is the National Longitudinal Survey of Youth Cohort (1979--1994);The results show that there is a trade off between the demand for health and the occasions of binge drinking. Youths reduce their occasions of binge drinking when they increase the demand for health, and vice versa. The finding supports the forward-looking hypothesis and that heavy drinking is addictive. Furthermore, we found a statistically weak effect of the alcohol price on the demand for binge drinking, and the long run alcohol price elasticity of the probability of heavy drinking, binge drinking, and no binge drinking are relatively small, -0.24, 0.03, and 0.21, respectively. The short run price elasticities are -0.09, 0.01, and 0.08, respectively. The results suggest that the demand for binge drinking is not price responsive in the short run or long run;Continued binge drinking results in lower wage and health profiles, whereas it does not have significant impact on hours worked. Policy simulations show that increasing alcohol price by 100% decreases the occasions of binge drinking by only 5%, but raising the minimum legal drinking age one year reduces the occasions of binge drinking among underage youths by about 5%. The effect of increasing the alcohol price and the minimum drinking age on health status, hours worked, and log wage are positive, however, their magnitudes are small. Our results suggest that policy makers should focuses on affecting the age at which young people start drinking and taxing alcohol is a relatively inefficient policy for achieving this

Binge Drinking and Labor Market Success: A Longitudinal Study on Young People

This paper presents a two equation model of joint outcomes on an individualï¾’s decision to binge drink and on his/her annual labor market earnings. The primary data source is the 1979 cohort of the National Longitudinal Survey of Youth (NLSY79), 19791994. We show that binge drinking behavior is quite alcoholprice responsive and is a rational addiction. A new result is that an individualï¾’s decision to binge drink has a statistically significant negative effect on his/her earnings. Furthermore, we conducted simulations of the shortrun and longrun impacts of increasing the alcohol price. They showed that that the tendency for an individual to binge drink heavily is reduced significantly, and the reduction is greater in the long than shortrun simulation. Also, an individualï¾’s annual earnings were increased. However, in the structural model, an individualï¾’s earnings have no significant effect on his/her tendency to engage in binge drinking. Our results contradict earlier findings from crosssection evidence that showed increased alcohol consumption raised an individualï¾’s earnings or wages.

Location and the Low-Income Experience: Analyses of Program Dynamics in the Iowa Family Investment Program

In 1993, the state of Iowa, through waivers, implemented reforms creating the Family Investment Program (FIP), a program similar to the Temporary Assistance for Needy Families (TANF) created under the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). The goals of FIP (helping program recipients leave poverty and become self-supporting) parallel the intent of TANF and PRWORA (Holcomb et al. 1998; Iowa Department of Human Services 1996). FIP merged and coordinated several existing programs and tied support for job training, education, child care, and transportation more directly to income transfers. Iowa has had to change FIP very little to meet current federal guidelines. Thus, Iowa provides over seven years of experience under a program with rules and incentives similar to those instituted nationwide in 1996

Innovation at the State Level: Initial Effects of Welfare Reform in Iowa

In 1993, the State of Iowa reformed its welfare program by creating the Family Investment Program (FIP), a program designed to help its participants achieve economic self-sufficiency. This paper examines the experiences of individuals and families who leave FIP. Specifically, the study explores why some low-income households successfully leave public assistance, while others who leave later return. The study shows that in Iowa, the FIP has been relatively successful in supporting the transition of those leaving the program, and that income is a key determinant of participation and ability to stay off public assistance programs

Why rapidly expanding the number of college-trained workers may not lower income inequality: the curious case of Taiwan, 1978-2011

Since 1990, Taiwan increased the college share of its labor force from 7% to 28% by converting junior colleges to 4-year colleges. Such a rapid surge in skill supply should suppress college wages and lower income inequality. Instead, inequality rose steadily. The surge of weaker college graduates made them weak substitutes for better trained college graduates, increasing wage inequality within skill groups. The college premium would have been 15% higher had college quality remained unchanged at its 1992 level. The Taiwan case shows that increasing college access alone will not lower income inequality unless college quality is maintained

Performance Pay, the Marriage Market and Rising Income Inequality in Taiwan

Taiwan expanded its college access significantly over the past two decades by converting 2-year junior colleges to 4-year colleges and relaxing entrance standards. The share of college graduates in the 22–24 years old population rose from 12 to 71% between 1990 and 2014. This should have suppressed returns to schooling and lowered household income inequality. Instead, Taiwan’s Gini coefficient rose. We show that rising use of performance pay and positive assortative mating in the marriage market jointly increase the household income inequality by 46.5% between 1980 and 2014. Our results suggest that uneven quality of the most recent cohorts of college graduates led to two sources of rising household income inequality: the increased use of bonus pay which increases residual inequality among college graduates; and matching on unobserved skills in the marriage market which increases inequality among married couples