"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 half of federal spending, and have traditionally been viewed as unconnected. We develop an economic framework for valuing improvements in health and apply it to exploring the relationship between annuity programs and the value of life. Incorporating incomplete annuitization into the conventional economic theory of life-extension generates several novel findings. First, public annuity programs have boosted the demand for life-extension. For instance, retirement programs such as US Social Security have added $150 billion (or 15 percent) to the value of a 1 percent decline in mortality. Second, in contrast to the conventional theory, a given mortality improvement may be worth more, not less, to patients facing shorter lives. Holding income and wealth constant, the value of statistical life (VSL) for a 50-year-old with 15 years of remaining life expectancy is $1 million greater than it is for a 50-year-old with 35 years of life expectancy. Thus, existing economic analysis may be undervaluing treatment of severe illness relative to mild ones. Finally, our framework implies that treatments may be worth more than prevention, all else equal. For instance, we calculate that treating a chronic condition such as cancer is worth 50 to 100 percent more than achieving the same outcome through prevention.
"The Insurance Value of Medical Innovation" (with Darius Lakdawalla and Anup Malani). Journal of Public Economics, January 2017, 145: 94-102.
[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.
[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.
[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
"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.
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, Productivity, 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)
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.
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.
|National Institute on Aging,
|J-PAL North America,
|National Science Foundation,
|Robert Wood Johnson Foundation,
Other selected publications
"Healthy, Body Weight, and Obesity" (with Darius Lakdawalla).
Oxford Handbook of Economics and Human Biology, (Oxford University Press), 2016.
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.
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.
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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