Count data models with variance of unknown form: an application to a hedonic model of worker absenteeism

We examined an econometric model of counts of worker absences due to illness. The underlying theoretical model is of a sluggishly adjusting hedonic labor market. We compared results fromı three parametric estimators, nonlinear least squares plus Poissonand negative binomial pseudo maximum likelihood, to generalized least squares using nonparametric estimates of the conditional variance. Our data support the hedonic model of worker absenteeism. Semiparametric generalized least squares coefficients are similar in sign, magnitude, and statistical significance to their econometric analogs where the mean and variance of the errors were specified ex ante. Overdispersion test reject the Poisson specification. Robustness checks confirm that in our dataı parameter estimates are sensitive to regressor list but are not sensitive to econometric technique, including how we corrected for possible heteroskedasticity of unknown form

Losers and Losers: Some Demographics of Medical Malpractice Tort Reforms

Our research examines individual differences in the effects of medical malpractice tort reforms on pre-trial settlement speed and settlement amounts by age and most likely settlement size. Findings of note include that, unlike previously assumed, both absolute and percentage losses from tort reform are small for infants in an asset value sense and that the prime-aged working population is the group most negatively affected by tort reform. Maximum entropy quantile regressions highlight the robustness of our conclusions and reveal that the settlement losses most informative for policy evaluation differ greatly from mean regression estimates.medical malpractice, tort reform, Texas closed claims, damage caps, quantile regression, maximum entropy

Workplace Safety Policy: Past, Present, and Future

With an annual budget of about $400 million, the Occupational Safety and Health Administration (OSHA) is about 5 percent the size of the Environmental Protection Agency, another federal agency created by President Richard M. Nixon in 1970, the "Year of the Environment." Nearly all workers in the United States come under OSHA's juridction, with some notable exceptions, including miners, transportation workers, many public employees, and people who are self-employed. OSHA is currently responsible for ptoecting over 100 million workers at 6 million work sites with the help of only about 2,000 workplace health and safety inspectors. Nevertheless, suppoers of OSHA argue that it has significantly improved worker safety over the last 30 years and that a beefed-up enforcement effort would produce even greater improvements. We examine the available evidence and find little support to the notion that OSHA has effectively reduced accidents and diseases in the workplace or that a more vigorous enforcement campaign would be likely to do so. Other policy instruments--tort laws, state Workers' Compensation insurance programs, and research and public education on the causes and consequences of work hazards--now keep workplace deaths and injuries low and can reduce them even more. The wage premiums, estimated at$210 billion per year, that workers receive for accepting job-related health hazards give employers a stronger economic incentive to eliminate workplace health and safety hazards than the $132 million per year in fines imposed by OSHA and its state counterparts for violations of workplace safety standards. Because of the heterogeneity of workers and firms, we argue that public policy should expand the economic incentives for workplace safety while allowing firms and workers freedom to discover on their own the best ways to improve workplace safety.

Hedonic Wage Equilibrium: Theory, Evidence and Policy

We examine theoretically and empirically the properties of the equilibrium wage function and its implications for policy. Our emphasis is on how the researcher approaches economic and policy questions when there is labor market heterogeneity leading to a set of wages. We focus on the application where hedonic models have been most successful at clarifying policy relevant outcomes and policy effects, that of the wage premia for fatal injury risk. Estimates of the overall hedonic locus we discuss imply the so-called value of a statistical life (VSL) that is useful as the benefit value in a cost-effectiveness calculation of government programs to enhance personal safety. Additional econometric results described are the multiple dimensions of heterogeneity in VSL, including by age and consumption plans, the latent trait that affects wages and job safety setting choice, and family income. Simulations of hedonic market outcomes are also valuable research tools. To demonstrate the additional usefulness of giving detail to the underlying structure we not only develop the issue of welfare comparisons theoretically but also illustrate how numerical simulations of the underlying structure can also be informative. Using a reasonable set of primitives we see that job safety regulations are much more limited in their potential for improving workplace safety efficiently compared to mandatory injury insurance with experience rated premiums. The simulations reveal how regulations incent some workers to take more dangerous jobs, while workers’ compensation insurance does not (or less so).hedonic labor market equilibrium, VSL, panel data, job safety, OSHA, quantile regression, workers’ compensation insurance

Data Mining Mining Data: MSHA Enforcement Efforts, Underground Coal Mine Safety, and New Health Implications

Studies of industrial safety regulations, OSHA in particular, often find little effect on worker safety. Critics of the regulatory approach argue that safety standards have little to do with industrial injuries, and defenders of the regulatory approach cite infrequent inspections and low penalties for violating safety standards. We use recently assembled data from the Mine Safety and Health Administration (MSHA) concerning underground coal mine production, safety regulatory activities, and workplace injuries to shed new light on the regulatory approach to workplace safety. Because all underground coal mines are inspected at least once per quarter, MSHA regulations will not be ineffective because of infrequent inspections. We estimate over 200 different specifications of dynamic mine safety production functions, including ones using deliberately upward biased estimators, and cherry pick the most favorable mine safety effect estimates. Although most estimates are of insignificant MSHA effects, we select the single regression specification producing the most favorable MSHA impact from the agency viewpoint, which we then use in a policy evaluation. We address the question of whether it would be cost-effective to move some of MSHA's enforcement budget into alternative programs that could also improve the health of the typical miner. Even using cherry picked results most favorable to the agency, MSHA is not cost effective at its current levels. Even though MSHA is a small program when judged against others like OSHA and EPA, MSHA's targeted public health objective could be much better served (almost 700,000 life years gained on balance for typical miners) if a quarter of MSHA's enforcement budget were reallocated to other programs such as more heart disease screening or defibrillators at worksites.

Tax Reform and Automatic Stabilization

A fundamental property of a progressive income tax is that it provides implicit collective insurance against idiosyncratic shocks to income by dampening the variability of disposable income and consumption. The Economic Recovery Tax Act of 1981 (ERTA) and the Tax Reform Act of 1986 (TRA86) greatly reduced the number of marginal tax brackets and the maximum marginal rate, which limits the ability of households to stabilize consumption in the face of transitory fluctuations in taxable income. We examine the effect of the federal income tax reforms of the 1980s on the associated degree of automatic stabilization of consumption. The empirical framework derives from the consumption insurance literature where the ideal outcome is spatially equal changes in households' marginal utilities of consumption. Because evidence for U.S. households rejects complete consumption insurance we begin with a model of partial consumption insurance, which we use to identify how the degree of partial insurance has changed since ERTA and TRA86. Our data come from interview years 1980-1991 in the Panel Study of Income Dynamics. Although in some cases the tax reforms of the 1980s actually increased the automatic stabilization inherent in a progressive income tax (especially when the Social Security payroll tax and the Earned Income Tax Credit are included), our overall outcome is that ERTA and TRA86 reduced consumption stability by about 50 percent. More recent tax reforms, most notably increased EITC generosity, have restored or enhanced consumption insurance.

Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications

Our research fleshes out econometric details of examining possible social interactions in labor supply. We look for a response of a person\u27s hours worked to hours worked in the labor market reference group, which includes those with similar age, family structure, and location. We identify endogenous spillovers by instrumenting average hours worked in the reference group with hours worked in neighboring reference groups. Estimates of the canonical labor supply model indicate positive economically important spillovers for adult men. The estimated total wage elasticity of labor supply is 0.22, where 0.08 is the exogenous wage change effect and 0.14 is the social interactions effect. We demonstrate how ignoring or incorrectly considering social interactions can mis-estimate the labor supply response of tax reform by as much as 60 percent

Social Interactions in Demand

We examine theoretically demand in a two-good economy where the demand of one good is influenced by either a spillover effect in the form of an externality from other consumers\u27 choices and or a conformity effect representing a need for making similar choices as others. A positive spillover effect increases the demand for the good with interactions, and a conformity effect makes the demand curve pivot around the average market demand to make demand less price sensitive. The collateral implication is that spillover in consumption increases the associated derived demand for labor and conformity in consumption makes the associated derived demand for labor less elastic. Finally, we also demonstrate how the presence of a good with social interactions affects the demand for the good without social interactions and the associated demand for the labor producing the non-interactions good

Social Interactions in the Labor Market

We examine theoretically and empirically social interactions in labor markets and how policy prescriptions can change dramatically when there are social interactions present. Spillover effects increase labor supply and conformity effects make labor supply perfectly inelastic at a reference group average. The demand for a good may also be influenced by either a spillover effect or a conformity effect. Positive spillover increases the demand for the good with interactions, and a conformity effect makes the demand curve pivot to become less price sensitive. Similar social interactions effects appear in the associated derived demands for labor. Individual and community factors may influence the average length of poverty spells. We measure local economic conditions by the county unemployment rate and neighborhood spillover effects by the racial makeup and poverty rate of the county. We find that moving an individual from one standard deviation above the mean poverty rate to one standard deviation below the mean poverty rate (from the inner city to the suburbs) lowers the average poverty spell by 20–25 percent. We further consider overall labor market outcomes by examining theoretically the socially optimal wealth distribution. Interdependence in utility can mitigate the need to transfer wealth to low-wage individuals and may require them to be poorer by all objective measures. Finally, we quantify how labor market policy changes when there are household social interactions. Labor supply estimates indicate positive economically important spillovers for adult U.S. men. Ignoring or incorrectly considering social interactions can mis-estimate the labor supply response of tax reform in the United States by as much as 60 percent.social interactions, spillover, conformity, inequality, poverty, labor supply, reference group, social multiplier, income tax, PSID

Labor Supply with Social Interactions: Econometric Estimates and Their Tax Policy Implications

Our research fleshes out econometric details of examining possible social interactions in labor supply. We look for a response of a person\u27s hours worked to hours worked in the labor market reference group, which includes those with similar age, family structure, and location. We identify endogenous spillovers by instrumenting average hours worked in the reference group with hours worked in neighboring reference groups. Estimates of the canonical labor supply model indicate positive economically important spillovers for adult men. The estimated total wage elasticity of labor supply is 0.22, where 0.08 is the exogenous wage change effect and 0.14 is the social interactions effect. We demonstrate how ignoring or incorrectly considering social interactions can mis-estimate the labor supply response of tax reform by as much as 60 percent