Abstracts of Selected Recent NBER Working Papers

Abstracts of Selected Recent NBER Working Papers

NBER Working Paper 12291
John Cawley, Richard V. Burkhauser
Beyond BMI: The Value of More Accurate Measures of Fatness and Obesity in Social Science Research

Virtually all social science research related to obesity uses body mass index (BMI), usually calculated using self-reported values of weight and height, or clinical weight classifications based on BMI. Yet there is wide agreement in the medical literature that such measures are seriously flawed because they do not distinguish fat from fat-free mass such as muscle and bone. Here we evaluate more accurate measures of fatness (total body fat, percent body fat, and waist circumference) that have greater theo-retical support in the medical literature. We provide conversion formulas based on NHANES data so that researchers can calcu-late the estimated values of these more accurate measures of fatness using the self-reported weight and height available in many social science datasets. To demonstrate the benefits of these alternative measures of fatness, we show that using them significantly impacts who is classified as obese. For example, when the more accurate measures of fatness are used, the gap in between white and African American men increases substantially, with white men significantly more likely to be obese. In addition, the gap in obesity between African American and white women is cut in half (with African American women still significantly more likely to be obese). As an example of the value of fatness in predicting social science outcomes, we show that while BMI is positively correlated with the probability of employment disability in the PSID, when body mass is divided into its compo-nents, fatness is positively correlated with disability while fat-free mass (such as muscle) is negatively correlated with disability.

NBER Working Paper 12300
Sara Markowitz, John Tauras
Even for Teenagers, Money Does Not Grow on Trees; Teenage Substance Abuse and Budget Constraints

This paper is about the spending choices of youth, with a particular focus on how the demand for cigarettes, alcohol and marijuana are influenced by changes in the prices of other products. Youth tend to have small incomes and limited wants, with the result that many students spend the bulk of their income on only a few items. Fast food, clothing and entertainment make up the majority of products purchased by teenagers. The hypothesis to be tested in this project is that changes in the prices of the other goods commonly bought by teenagers will affect budget allocations and thereby affect the demand for substances. We estimate own and cross price effects using the prices of cigarettes, alcohol, marijuana and other consumer products including gasoline, clothing, entertainment, and fast food. Income effects are also estimated and show that teens with higher incomes and allow-ances are more likely to use substances. The policy implications of the results are discussed.

NBER Working Paper 12335
Jose J. Escarce, Arvind K. Jain, Jeannette Rogowski
Hospital Competition, Managed Care, and Mortality after Hospitalization for Medical Conditions: Evidence from Three States

This study assessed the effect of hospital competition and HMO penetration on mortality after hospitalization for six medical conditions in California, New York, and Wisconsin. We used linked hospital discharge and vital statistics data to study adults hos-pitalized for myocardial infarction, hip fracture, stroke, gastrointestinal hemorrhage, congestive heart failure, or diabetes. We es-timated logistic regression models with death within 30 days of admission as the dependent variable and hospital competition, HMO penetration, and hospital and patient characteristics as explanatory variables. Higher hospital competition was associated with lower mortality in California and New York, but not Wisconsin. In addition, higher HMO penetration was associated with lower mortality in California, but higher mortality in New York. In the context of the study states' history with managed care, these findings suggest that hospitals in highly competitive markets compete on quality even in the absence of mature markets. The findings also underscore the need to consider geographic effects in studies of market structure and hospital quality.

NBER Working Paper 12352
David M. Cutler, Adriana Lleras-Muney
Education and Health: Evaluating Theories and Evidence

There is a large and persistent association between education and health. In this paper, we review what is known about this link. We first document the facts about the relationship between education and health. The education "gradient" is found for both health behaviors and health status, though the former does not fully explain the latter. The effect of education increases with in-creasing years of education, with no evidence of a sheepskin effect. Nor are there differences between blacks and whites, or men and women. Gradients in behavior are biggest at young ages, and decline after age 50 or 60. We then consider differing reasons why education might be related to health. The obvious economic explanations - education is related to income or occupational choice - explain only a part of the education effect. We suggest that increasing levels of education lead to different thinking and decision-making patterns. The monetary value of the return to education in terms of health is perhaps half of t education on earnings, so policies that impact educational attainment could have a large effect on population health.

NBER Working Paper 12361
David C. Grabowski, Jonathan Gruber, Joseph J. Angelelli
Nursing Home Quality as Public Good

There has been much debate among economists about whether nursing home quality is a public good across Medicaid and private-pay patients within a common facility. However, there has been only limited empirical work addressing this issue. Using a unique individual level panel of residents of nursing homes from seven states, we exploit both within-facility and within-patient variation in payer source and quality to examine this issue. We also test the robustness of these results across states with dif-ferent Medicaid and private-pay rate differentials. Across our various identification strategies, the results generally support the idea that quality is a public good within nursing homes. That is, within a common nursing home, there is very little evidence to suggest that Medicaid-funded residents receive consistently lower quality care relative to their private-paying counterparts.

NBER Working Paper 12386
Jeffrey R. Brown, Courtney C. Coile, Scott J. Weisbenner
The Effect of Inheritance Receipt on Retirement

This paper uses the receipt of an inheritance to measure the effect of wealth shocks on retirement. Using the Health and Re-tirement Study (HRS), we first document that inheritance receipt is common among older workers - one in five households receives an inheritance over an eight-year period, with a median value of about $30,000. We find that inheritance receipt is asso-ciated with a significant increase in the probability of retirement. In particular, we find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period. Importantly, this effect is stronger when the inheritance is unexpected and thus more likely to represent an ex-ogenous shock to wealth.

NBER Working Paper 12392
Wolfram J. Horneff, Raimond Maurer, Olivia S. Mitchell, Ivica Dus
Optimizing the Retirement Portfolio: Asset Allocation, Annuitization, and Risk Aversion

Retirees must draw down their accumulated assets in an orderly fashion so as not to exhaust their funds too soon. We derive the optimal retirement portfolio from a menu that includes payout annuities as well as an investment allocation and a withdrawal strategy, assuming risk aversion, stochastic capital markets, and uncertain lifetimes. The resulting portfolio allocation, when fixed as of retirement, is then compared to phased withdrawal strategies such a "self-annuitization" plan or the 401(k) "default" pattern encouraged under US tax law. Surprisingly, the fixed percentage approach proves appealing for retirees across a wide range of risk preferences, supporting financial planning advisors who often recommend this rule. We then permit the retiree to switch to an annuity later, which gives her the chance to invest in the capital market and "bet on death." As risk aversion rises, annuities first crowd out bonds in retiree portfolios; at higher risk aversion still, annuities replace equities in t Making annuitization compulsory can also lead to substantial utility losses for less risk-averse investors.

NBER Working Paper 12429
Alan Monheit, Jessica Primoff Vistnes
Health Insurance Enrollment Decisions: Preferences for Coverage, Worker Sorting, and Insurance Take Up

The weak response by the uninsured to policy initiatives encouraging voluntary enrollment in health insurance has raised con-cerns regarding the extent to which the uninsured value health insurance. To address this issue, we use data from the 2001 Medical Expenditure Panel Survey to examine the association between health insurance preferences and coverage status. We also consider the role of such preferences in decisions to seek out and enroll in employment-based coverage. We find that adults with weak or uncertain preferences for health insurance are more likely than persons with strong preferences to be uninsured and less likely to acquire coverage. Our econometric work indicates that workers with weak or uncertain preferences are less likely to obtain job offers with insurance, reinforcing prior evidence that workers sort among jobs according to preferences for coverage. We also find that workers with weak or uncertain preferences are less likely to enroll in offered coverage and we estimate t necessary to compensate such workers for the utility loss were they to enroll. Our results suggest a dual approach to expanding coverage that includes both subsidies and educational efforts to inform targeted groups among the uninsured about the value of health insurance.

NBER Working Paper 12478
Janet Currie, W. Bentley McLeod
First Do No Harm? Tort Reform and Birth Outcomes

We examine the impact of tort reforms using U.S. birth records for 1989-2001. We make four contributions: First, we develop a model that analyzes the incentives created by specific tort reforms. Second, we assemble new data on tort reform. Third, we examine a range of outcomes. Finally, we allow for differential effects by demographic/risk group. We find that reforms of the "deep pockets rule" reduce complications of labor and C-sections, while caps on noneconomic damages increase them. Our results demonstrate there are important interactions between incentives created by tort law and other incentives facing physicians.

NBER Working Paper 12511
Daniel Polsky, Jalpa A. Doshi, Jose Escarce, Willard Manning, Susan M. Paddock, Liyi Cen, Jeanette Rogowski
The Health Effects of Medicare for the Near-Elderly Uninsured

We study how the trajectory of health for the near-elderly uninsured changes upon enrolling into Medicare at the age of 65. We find that Medicare increases the probability of the previously uninsured having excellent or very good health, decreases their probability of being in good health, and has no discernable effects at lower health levels. Surprisingly, we found Medicare had a similar effect on health for the previously insured. This suggests that Medicare helps the relatively healthy 65 year olds, but does little for those who are already in declining health once they reach the age of 65. The improvement in health between the unin-sured and insured were not statistically different from each other. The stability of insurance coverage afforded by Medicare may be the source of the health benefit suggesting that universal coverage at other ages may have similar health effects.

NBER Working Paper 12536
Jeffrey R. Brown, Norma Coe, Amy Finkelstein
Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the HRS

This paper provides empirical evidence of Medicaid crowd out of demand for private long-term care insurance. Using data on the near- and young-elderly in the Health and Retirement Survey, our central estimate suggests that a $10,000 decrease in the level of assets an individual can keep while qualifying for Medicaid would increase private long-term care insurance coverage by 1.1 percentage points. These estimates imply that if every state in the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law - a change that would decrease average household assets protected by Medicaid by about $25,000 - demand for private long-term care insurance would rise by 2.7 percentage points. While this represents a 30 percent increase in insurance coverage relative to the baseline ownership rate of 9.1 percent, it also indicates that the vast majority of households would still find it unattractive to purchase private We discuss reasons why, even with extremely stringent eligibility requirements, Medicaid may still exert a large crowd-out effect on demand for private insurance.



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