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Working papers

"Did Medicare Part D Reduce Mortality?" (with Jason Huh) (forthcoming, Journal of Health Economics)

We investigate the implementation of Medicare Part D and estimate that this prescription drug benefit program reduced elderly mortality by 2.2 percent annually. This was driven primarily by a reduction in cardiovascular mortality, the leading cause of death for the elderly. There was no effect on deaths due to cancer, a condition whose drug treatments are covered under Medicare Part B. We validate these results by demonstrating that the changes in drug utilization following the implementation of Medicare Part D match the mortality patterns we observe. We calculate that the value of the mortality reduction is equal to $5 billion per year.

"The Mortality and Medical Costs of Air Pollution: Evidence from Changes in Wind Direction" (with Tatyana Deryugina, Garth Heutel, Nolan Miller, and David Molitor) (under review)

We estimate the effect of acute air pollution exposure on mortality, life-years lost, and health care utilization among the US elderly. We address endogeneity and measurement error using a novel instrument for air pollution that strongly predicts changes in fine particulate matter (PM 2.5) concentrations: changes in the local wind direction. Using detailed administrative data on the universe of Medicare beneficiaries, we find that an increase in daily PM 2.5 concentrations increases three-day county-level mortality, hospitalizations, and inpatient spending, and that these effects are not explained by co-transported pollutants like ozone and carbon monoxide. We then develop a new methodology to estimate the number of life-years lost due to PM 2.5. Our estimate is much smaller than one calculated using traditional methods, which do not adequately account for the relatively low life expectancy of those killed by pollution. Heterogeneity analysis reveals that life-years lost due to PM 2.5 varies inversely with individual life expectancy, indicating that unhealthy individuals are disproportionately vulnerable to air pollution. However, the largest aggregate burden is borne by those with medium life expectancy, who are both vulnerable and comprise a large share of the elderly population.

"A Model of Addiction and Social Interactions" (under review)

Many consumer behaviors are both addictive and social. Understanding how these two phenomena interact informs basic models of human behavior, and matters for policymakers when the behavior is regulated. I develop a new model of demand that incorporates both addiction and social interactions and show that, under certain conditions, social interactions reinforce the effects of addiction. I also show how the dynamics introduced by addiction can solve the pernicious problem of identifying the causal effects of social interactions. I then use the model to illustrate a new and important identification problem for studies of social interactions: existing estimates cannot be used to draw welfare conclusions or even to deduce whether social interactions increase aggregate demand. Finally, I develop a method which allows researchers to distinguish between two common forms of social interactions and draw welfare conclusions.

"The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation" (with Tatyana Deryugina and Alex MacKay) (under review)

Understanding the response of consumers to electricity prices is essential for crafting efficient energy market regulations, evaluating climate change policy, and investing optimally in infrastructure. We study the dynamics of residential electricity demand by exploiting price variation arising from a natural experiment: the introduction of an Illinois policy that enabled communities to select electricity suppliers on behalf of their residents. Participating communities experienced average price decreases in excess of 10 percent in the two years following adoption. Using a flexible difference-in-differences matching approach, we estimate a one-year price elasticity of -0.14 and three-year elasticity of -0.29. We also present evidence that consumers increased usage in anticipation of the price changes. Finally, we estimate a forward-looking demand model and project that the price elasticity converges to a value between -0.30 and -0.35 after ten years. Our findings demonstrate the importance of accounting for long-run dynamics in this context.

"Mortality Risk, Insurance, and the Value of Life" (with Daniel Bauer and Darius Lakdawalla)

Public health insurance and public annuity programs account for about half of federal spending and large bodies of economic research. However, they have so far been viewed as unconnected. We generalize the widely used economic theory of life-extension to explore the close connections between these two sets of policies. Our framework, which introduces incomplete annuitization and stochastic mortality into the conventional economic theory of life-extension, generates several novel findings. First, greater annuitization alters the willingness to pay for life-extension, commonly called the value of a statistical life (VSL). Second, shocks to mortality risk increase VSL for a consumer who is incompletely annuitized. Finally, we employ our framework to introduce a more general concept, the value of a statistical illness (VSI), which quantifies an individualís willingness to pay to avoid an increase in the risk of acquiring an illness that affects her mortality rate.


"The Insurance Value of Medical Innovation" (with Darius Lakdawalla and Anup Malani). Journal of Public Economics, January 2017, 145: 94-102. [Pre-publication PDF] [Data and code]

Economists think of medical innovation as a valuable but risky good, producing health benefits but increasing financial risk for consumers and healthcare payers. This perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease. We present an alternative framework that accounts for all these sources of value and links them to the value of healthcare insurance. We show that any innovation worth buying reduces overall risk and generates positive insurance value on its own. We conduct a stylized numerical exercise to assess the potential empirical significance of our insights. Our calculations suggest that conventional methods meaningfully understate the value of historical health gains and disproportionately undervalue treatments for the most severe illnesses, where physical risk to consumers is the costliest. These calculations also suggest that the value of physical insurance from new technologies may exceed the financial spending risk that they pose.

"Interpreting Pre-trends as Anticipation: Impact on Estimated Treatment Effects from Tort Reform" (with Anup Malani). Journal of Public Economics, April 2015, 124: 1-17. [Pre-publication PDF] [Data and code]

While conducting empirical work, researchers sometimes observe changes in outcomes before adoption of a new policy. The conventional diagnosis is that treatment is endogenous. This observation is also consistent, however, with anticipation effects that arise naturally out of many theoretical models. This paper illustrates that distinguishing endogeneity from anticipation matters greatly when estimating treatment effects. It provides a framework for comparing different methods for estimating anticipation effects and proposes a new set of instrumental variables to address the problem that subjects' expectations are unobservable. Finally, this paper examines a specific set of tort reforms that was not targeted at physicians but was likely anticipated by them. Interpreting pre-trends as evidence of anticipation increases the estimated effect of these reforms by a factor of two compared to a model that ignores anticipation.

"Incentives for Reporting Disease Outbreaks" (with Ramanan Laxminarayan and Anup Malani). PLOS ONE, March 2014, 9(3): e90290. [Pre-publication PDF] [Data and code]

Countries face conflicting incentives to report infectious disease outbreaks. Reports of outbreaks can prompt other countries to impose trade and travel restrictions, which has the potential to discourage reporting. However, reports can also bring medical assistance to contain the outbreak, including access to vaccines. We compiled data on reports of meningococcal meningitis from 54 African countries between 1966 and 2002, a period marked by two events: first, a large outbreak reported from many countries in 1987 associated with the Hajj that resulted in more stringent requirements for meningitis vaccination among pilgrims; and second, another large outbreak in Sub-Saharan Africa in 1996 that led to a new international mechanism to supply vaccines to countries reporting a meningitis outbreak. We find that the Hajj vaccination requirements started in 1988 were associated with reduced reporting, especially among countries with relatively fewer cases reported between 1966 and 1979. After the vaccine provision mechanism was in place in 1996, reporting among countries that had previously not reported meningitis outbreaks increased. These results indicate that countries may respond to changing incentives to report outbreaks when they can do so. In the long term, these incentives are likely to be more important than surveillance assistance in prompt reporting of outbreaks.

"The Relation Between Variance and Information Rent in Auctions" (with Brett Katzman and Jesse Schwartz). International Journal of Industrial Organization, March 2010, 28(2): 127-130. [Pre-publication PDF]

This paper examines the conventional wisdom, expressed in McAfee and McMillan's (1987) widely cited survey paper on auctions, that links increased variance of bidder values to increased information rent. We find that although the conventional wisdom does indeed hold in their (1986) model of a linear contract auction, this relationship is an artifact of that particular model and cannot be generalized. Using Samuelson's (1987) model, which is similar but allows for unobservable costs, we show that increased variance does not always imply increased information rent. Finally, we give the appropriate measure of dispersion (different from variance) that provides the link between the bidder value distribution and information rent.

Works in Progress

"Selection and Medical Spending in Wellness Programs: Evidence from the Illinois Workplace Wellness Study" (with Damon Jones and David Molitor)

"The Windís Fatal Blow: the Effect of Transported Air Pollution on Mortality" (with Tatyana Deryugina, Nicole Reimer, and Matthew West)

"Driver Licensing Laws and Mortality: Evidence from a Regression Discontinuity Design" (with Jason Huh)

"Does Medicare Improve Quality of Life?"

"Evasion or Stockpiling? The Effect of Anticipated Future Tax Changes on Gasoline Sales" (with Don Fullerton)

External grants

Investigator, "The Impact of Temperature and Pollution on Mortality, Morbidity, and Health Care Cost Among the Elderly" (with Tatyana Deryugina, Garth Heutel, Nolan Miller, and David Molitor), National Institute on Aging, R01 AG053350, 07/2016-06/2021, $1.6 million.

Principal Investigator, "The Illinois Workplace Wellness Study" (with Damon Jones, David Molitor, and Laura Payne), $1.9 million.

National Institute on Aging,  R01 AG050701,  08/2015-04/2018,  $1.1 million.
J-PAL North America,  5710004125,  07/2016-06/2018,  $321,990.
National Science Foundation,  1730546,  07/2017-06/2019,  $300,000.
Robert Wood Johnson Foundation,  73730,  07/2016-01/2018,  $200,000.

Upjohn Institute Early Career Research Award, "Worksite Wellness: A Field Experiment on Participation Incentives and Selection into Wellness Programs" (with David Molitor), 2017, $5,000.

Other selected publications

"Healthy, Body Weight, and Obesity" (with Darius Lakdawalla). Oxford Handbook of Economics and Human Biology, (Oxford University Press), 2016. [Pre-publication PDF]

The rise in obesity has generated enormous concern among policy makers and the general public. Economists have focused on explaining the causes of this rise, along with the attendant implications for public policy. This chapter summarizes the economic literature on the theory of weight determination, including the optimal determination of food intake and exercise, and the influence of prices and peer effects. In addition, the chapter reviews the empirical literature that tests a range of explanations for the rise in obesity, such as declining food prices, increasing price of exercise, rising income, peer effects, and the decline in cigarette consumption.

"The Complex Relationship Between Healthcare Reform and Innovation" (with Darius Lakdawalla and Anup Malani). The Future of Healthcare Reform in the United States, (University of Chicago Press), 2015. [Pre-publication PDF]

In this chapter we examine some of the interesting and important ways in which healthcare reform, particularly expansion of health insurance, affects innovation. We argue that the complexity and uncertainty of the relationship between insurance and innovation puts a premium on ability to experiment with alternative forms of healthcare reform.

"Tools to Address Illinois Revenue: Increasing Sin Taxes." State Tax Notes, June 2014, 707-711. [Pre-publication PDF]

In this report, I estimate the revenue that could be generated by increasing Illinois sin taxes on cigarettes, alcohol, and gambling. I discuss the efficiency and distributional effects of those taxes, as well as potential savings from a reduction in cigarette and alcohol consumption.

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