NBER Working Papers by Jeffrey Kubik

Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of investors in its region. We test this proposition using data on U.S. Census regions and states, and find clear-cut support for it. Most of the variation in the ratio of interest comes from differences across regions in aggregate book value per capita. Regions with low population density--e.g., the Deep South--are home to relatively few firms per capita, which leads to higher stock prices via an "only-game-in-town" effect. This effect is especially pronounced for smaller, less visible firms, where the impact of location on stock prices is roughly 12 percent.

We investigate the effect of health insurance coverage on the decision of individuals to apply for Disability Insurance (DI). Those who qualify for DI receive public insurance under Medicare, but only after a two-year waiting period. This raises concerns that many disabled are going uninsured while they wait for their Medicare coverage. Moreover, the combination of this waiting period and the uncertainty about application acceptance may deter those with health insurance on their jobs, but no alternative source of coverage, from leaving work to apply for DI. Data from the Health and Retirement Survey show that, in fact, uninsurance does not rise during the waiting period for DI benefits; reductions in own employer coverage are small, and are offset by increases in other sources of insura...