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<description>The Latest NBER Working Papers</description>  
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<title>Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes -- by Paul Gertler, Christel Vermeersch</title>
<description>We nested a large-scale field experiment into the national rollout of the introduction of performance pay for medical care providers in Rwanda to study the effect of incentives for health care providers. In order to identify the effect of incentives separately from higher compensation, we held constant compensation across treatment and comparison groups - a portion of the treatment group's compensation was based on performance whereas the compensation of the comparison group was fixed. The incentives led to a 20% increase in productivity, and significant improvements in child health. We also find evidence of a strong complementarity between performance incentives and baseline provider skill.</description>
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<title>Unobservable Selection and Coefficient Stability: Theory and Validation -- by Emily Oster</title>
<description>A common heuristic for evaluating the problem of omitted variable bias in economics is to look at coeffcient movements after inclusion of controls. The theory under which this is informative is one in which the selection on observables is proportional to selection on unobservables, an idea which is formalized in Altonji, Elder and Taber (2005). However, this connection is rarely made explicit and the underlying assumption is rarely tested. In this paper I first show how, under proportional selection, coeffcient movements, along with movements in R-squared values, can be used to calculate a measure of omitted variable bias. I then undertake two validation exercises. First, I relate maternal behavior on child birth weight and IQ. Simple controlled regressions give misleading estimates; estimates adjusted with a proportional selection adjustment fit significantly better. Second, I match observational and randomized trial data for 29 relationships in public health. I show that on average bias-adjusted coeffcients perform much better than simple controlled coeffcients and I suggest that a simple form of this adjustment could dramatically improve inference in many public health contexts.</description>
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<title>Adjusting Measures of Economic Output for Health: Is the Business Cycle Countercyclical? -- by Mark L. Egan, Casey B. Mulligan, Tomas J. Philipson</title>
<description>Many national accounts of economic output and prosperity, such as gross domestic product (GDP) or net domestic product (NDP), offer an incomplete picture by ignoring, for example, the value of leisure, home production, and the value of health. Discussed shortcomings have focused on how unobserved dimensions affect GDP levels but not their cyclicality, which affects the measurement of the business cycle.  This paper proposes new measures of the business cycle that incorporate monetized changes in health of the population.  In particular, we incorporate in GDP the dollar value of mortality, treating it as depreciation in human capital analogous to how NDP measures treat depreciation of physical capital. We examine the macroeconomic fluctuations in the United States and globally during the past 50 years, taking into account how depreciation in health affects the cycle.  Because mortality tends to be pro-cyclical, fluctuations in standard GDP measures are offset by monetized changes in health; booms are not as valuable as traditionally measured because of increased mortality, and recessions are not as bad because of reduced mortality.  Consequently, we find that U.S. business cycle fluctuations appear milder than commonly measured and may even be reversed for the majority of "recessions" after accounting for the cyclicality of health.  We find that adjusting for mortality reduces the measured U.S. business cycle volatility during the past 50 years by about 37% in the United States and 46% internationally. We discuss future research directions for more fully incorporating the cyclicality of unobserved health capital into standard output measurement.</description>
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