Knowledge that Transforms

Abstract Health insurance affects the rate at which individuals visit hospitals and emergency departments (EDs). We identify the causal effect of losing health insurance using a regression discontinuity design. We compare individuals just before and after their twenty third birthday, which insurers have used as a cutoff after which students are no longer eligible for their parents' health insurance: 1.5% of young adults lose their health insurance upon turning 23, and this transition leads to a 1.6% decrease in ED visits and a 0.8% decrease in hospital stays. We discuss why these estimates are larger than those observed among teenage populations.

This paper extends Brock and Durlauf's (2001a, 2001b) binary choice complete network (or group interaction) model with homogeneous rational expectations to a general network model with heterogeneous rational expectations. In our model, individuals will form expectations regarding peers' behaviors taking into account their characteristics. Endogenous, contextual, and correlated effects are all identifiable. Conditions for unique equilibrium are established. For a complete network with heterogeneous rational expectations, multiple equilibria can be characterized by an aggregate scalar index. The empirical results on adolescents' smoking behaviors show significant endogenous and contextual effects, even after controlling for school-grade random effects and school fixed effects.

Abstract This paper provides direct evidence on the extent of monopsony power in the low-wage labor market by estimating the firm-level elasticity of labor supply for nurse aides in the long-term care (nursing home) industry. Using exogenous variation in hiring induced by the passage of a state minimum nurse staffing law, I find that facilities initially out of compliance with the new law did not have to raise their wage offers relative to their competitors in order to hire more nurses. While this is consistent with perfect competition in simple monopsony models of the labor market, I discuss how the results may be more ambiguous in more complicated models.

We provide an empirical test of contrast effects—a bias where a decision maker perceives information in contrast to what preceded it—in the quasi-experimental context of speed dating decisions. We document that prior partner attractiveness reduces the subsequent likelihood of an affirmative dating decision. This relationship is confined to recent interactions, consistent with a perceptual error, but not learning or the presence of a quota in affirmative responses. The contrast effect is driven almost entirely by male evaluators. Additional evidence documents the effect's linearity with respect to prior partner attractiveness, its amplification for partners of moderate attractiveness, and its partial attenuation with accumulated experience.

Using administrative panel data on the entire population of new labour immigrants to The Netherlands, we estimate the effects of individual labour market spells on immigration durations using the “timing-of-events” method. The model allows for correlated unobserved heterogeneity across migration, unemployment and employment processes. We find that unemployment spells increase return probabilities for all immigrant groups, while re-employment spells typically delay returns.

We investigate how prenatal economic fluctuations affected birth weight in Argentina during the period from January 2000 to December 2005 and document its procyclicality.We find evidence that the birth weight of children born to low-educated (less than high school) mothers is sensitive to macroeconomic fluctuations during both the first and third trimesters of pregnancy, while those of high-educated (high school or above) mothers react only to the first trimester of pregnancy.Our results are consistent with low-educated women facing credit constraints and suffering from both nutritional deprivation and maternal stress, while high-educated women are affected only by stress.

Using Bayesian methods, we estimate a Markov-switching New Keynesian (MSNK) model that allows shifts in the monetary policy reaction coefficients and shock volatilities with U.S. data. We find that a more aggressive monetary policy regime was in place after the Volcker disinflation and before 1970 than during the Great Inflation of the 1970s. Our estimates also indicate that a low-volatility regime has been in place during most of the sample period after 1984. We connect the timing of the different regimes to a measure of inflation persistence.

To explain the rise in Afghan opium production, we explore how rising conflicts change the incentives of farmers. Conflicts make illegal opportunities more profitable as they increase the perceived lawlessness and destroy infrastructure crucial to alternative crops. Exploiting a unique data set, we show that Western hostile casualties, our proxy for conflict, have a strong impact on subsequent local opium production. Using the period after the planting season as a placebo test, we show that conflict has a strong effect before but no effect after planting, indicating causality.

This paper explores the empirical content of the weak axiom of revealed preference (WARP) for repeated cross-sections. In a heterogeneous population, the fraction of consumers who violate WARP is not point identified but can be bounded. These bounds, as well as some nonparametric refinements, correspond to intuitive behavioral assumptions if there are two goods. With three or more goods, such intuitions break down, and plausible assumptions can have counterintuitive implications. We also provide estimators and confidence regions. The empirical application reveals that in the British Family Expenditure Survey, upper bounds are frequently positive but lower bounds are not significantly so.

The Schumpeterian opportunity cost hypothesis predicts that firms concentrate innovative activities in recessions. However, empirical evidence suggests that innovative activities are procyclical. Theory proposes that firms shift R&D investments and innovation from recessions to booms to maximize returns by capturing high-demand periods before imitators compete away rents. This paper provides the first empirical test of these predictions. Results indicate that R&D spending is more procyclical in industries with faster obsolescence, where matching invention to demand is more valuable, and innovation is more procyclical in industries with weaker IP protection, where imitation poses a greater threat.