Estimating Compensating Wage Differentials with Endogenous Job Mobility

We demonstrate a strategy for using matched employer-employee data to correct endogenous job mobility bias when estimating compensating wage differentials. Applied to fatality rates in the census of formal-sector jobs in Brazil between 2003-2010, we show why common approaches to eliminating ability bias can greatly amplify endogenous job mobility bias. By extending the search-theoretic hedonic wage framework, we establish conditions necessary to interpret our estimates as preferences. We present empirical analyses supporting the predictions of the model and identifying conditions, demonstrating that the standard models are misspecified, and that our proposed model eliminates latent ability and endogenous mobility biase

Essays On The Estimation Of Prices In Implicit Markets

Chapter one examines workers' labor supply decisions to estimate both the equilibrium compensating differential for fatal risk and marginal willingness to accept fatal risk. Using new panel data from commercial fishing deckhands in the Alaskan Bering Sea between 2003-2009, I exploit variation within the worker-firm level in hourly earnings across fishing seasons and exogenous variation in weatherdependent seasonal fatality rates to identify the compensating differential for occupational fatality risk. This identification approach avoids many of the common sources of bias in the estimation of compensating differentials, including endogenous job switching and unobserved worker and firm heterogeneity. Additionally, changes in earnings caused by exogenous changes in risk within the worker-firm level identify information about individual preferences for risk that is not conveyed by the equilibrium wage-risk envelope. A structural labor supply model incorporates dynamic job-specific skill accumulation, which affects subsequent earnings. The compensating differential, normalized to a value of statistical life, is estimated to be $6.17 million using a reduced-form model and$6.75 million using a structural model. Estimates from both models suggest that wages increase as a concave function of the level of risk. The findings imply that aversion to marginal increases in fatal risk falls as the level of risk rises, and that the marginal VSL is a decreasing function of the level of risk. The second chapter uses unique data from a survey of physicians in 5 states to provide the first comprehensive analysis of the effects of non-compete agreements on labor markets. We estimate factors associated with the use of non-competes, the compensating wage differential for accepting a non-compete clause, and discuss the effects that non-compete clauses have on mobility and the geographic distribution of primary care physicians. We find that non-competes are used frequently among primary care physicians, and that they impose binding constraints on labor market behavior and are associated with significant compensating wage premiums of about 11% of wages. The analysis suggests that state-level public policies play an important role, as we find that states with very strict enforceability of non-compete agreements have fewer physicians per capita and higher prices for physician services

Noncompete agreements in employment contracts

Labor market institutions that may weaken workers' bargaining leverage have received increased scrutiny in recent years. One example is noncompete agreements, which prevent workers from freely moving across employers, potentially weakening earnings growth. New data sources and empirical evidence have led policymakers to consider sharp restrictions on their use, especially among lower-income workers. These restrictions take many different forms, each of which has unique tradeoffs between the desire to protect workers while allowing firms to use noncompetes in cases where they may create social value

The Estimation of Compensating Wage Differentials: Lessons From the <i>Deadliest Catch</i>

<p>I use longitudinal survey data from commercial fishing deckhands in the Alaskan Bering Sea to provide new insights on empirical methods commonly used to estimate compensating wage differentials and the value of statistical life (VSL). The unique setting exploits intertemporal variation in fatality rates and wages within worker-vessel pairs caused by a combination of weather patterns and policy changes, allowing identification of parameters and biases that it has only been possible to speculate about in more general settings. I show that estimation strategies common in the literature produce biased estimates in this setting, and decompose the bias components due to latent worker, establishment, and job-match heterogeneity. The estimates also remove the confounding effects of endogenous job mobility and dynamic labor market search, narrowing a conceptual gap between search-based hedonic wage theory and its empirical applications. I find that workers’ marginal aversion to fatal risk falls as risk levels rise, which suggests complementarities in the benefits of public safety policies. Supplementary materials for this article are available online.</p

Strategic Formulary Design in Medicare Part D Plans

The design of Medicare Part D causes most beneficiaries to receive fragmented health insurance, with drug and medical coverage separated. Fragmentation is potentially inefficient since separate insurers optimize over only one component of healthcare spending, despite complementarities and substitutabilities between healthcare types. Fragmentation of only some plans can also lead to market distortions due to differential adverse selection, as integrated plans may use drug formularies to induce enrollment by patients that are profitable in the medical insurance market. We study the design of insurance plans in Medicare Part D, and find that formularies reflects these two differences in incentives

Presentation: Estimating Compensating Wage Differentials with Endogenous Job Mobility

Presented at European Association of Labor Economists Sept 17 2016, Ghent BelgiumSupported by NSF Grant #113184

Estimating Compensating Wage Differentials with Endogenous Job Mobility

We demonstrate a strategy for using matched employer-employee data to correct endogenous job mobility bias when estimating compensating wage differentials. Applied to fatality rates in the census of formal-sector jobs in Brazil between 2003-2010, we show why common approaches to eliminating ability bias can greatly amplify endogenous job mobility bias. By extending the search-theoretic hedonic wage framework, we establish conditions necessary to interpret our estimates as preferences. We present empirical analyses supporting the predictions of the model and identifying conditions, demonstrating that the standard models are misspecified, and that our proposed model eliminates latent ability and endogenous mobility biasesCDEM_vc.pdf: 846 downloads, before Oct. 1, 2020

How Do Low-Income Enrollees in the Affordable Care Act Marketplaces Respond to Cost-Sharing?

The ACA requires insurers to provide cost-sharing reductions (CSRs) to low-income consumers on the marketplaces. We link 2013-2015 All-Payer Claims Data to 2004-2013 administrative hospital discharge data from Utah and exploit policy-driven differences in the value of CSRs that are solely determined by income. We find that enrollees with lower cost sharing have higher levels of health care spending, controlling for past health care use. We estimate the demand elasticity of total health care spending to be -0.10, but find larger elasticities for emergency room care, lifestyle drugs, and low-value care. We also find positive cross-price elasticities between outpatient and inpatient care

How do low-income enrollees in the affordable care act marketplaces respond to cost sharing?

The Affordable Care Act requires insurers to offer cost sharing reductions (CSRs) to low-income consumers on the Marketplaces. We link 2013-2015 All-Payer Claims Data to 2004-2013 administrative hospital discharge data from Utah and exploit policy-driven differences in the actuarial value of CSR plans that are solely determined by income. This allows us to examine the effect of cost sharing on medical spending among low-income individuals. We find that enrollees facing lower levels of cost sharing have higher levels of health care spending, controlling for past health care use. We estimate demand elasticities of total health care spending among this low-income population of approximately -0.12, suggesting that demand-side price mechanisms in health insurance design work similarly for low-income and higher-income individuals. We also find that cost sharing subsidies substantially lower out-of-pocket medical care spending, showing that the CSR program is a key mechanism for making health care affordable to low-income individual

How do low-income enrollees in the affordable care act marketplaces respond to cost sharing?

The Affordable Care Act requires insurers to offer cost sharing reductions (CSRs) to low-income consumers on the Marketplaces. We link 2013-2015 All-Payer Claims Data to 2004-2013 administrative hospital discharge data from Utah and exploit policy-driven differences in the actuarial value of CSR plans that are solely determined by income. This allows us to examine the effect of cost sharing on medical spending among low-income individuals. We find that enrollees facing lower levels of cost sharing have higher levels of health care spending, controlling for past health care use. We estimate demand elasticities of total health care spending among this low-income population of approximately -0.12, suggesting that demand-side price mechanisms in health insurance design work similarly for low-income and higher-income individuals. We also find that cost sharing subsidies substantially lower out-of-pocket medical care spending, showing that the CSR program is a key mechanism for making health care affordable to low-income individuals