Firm Heterogeneity and the Impact of Payroll Taxes
(with Anikó Bíró, Réka Branyiczki, Attila Lindner, and Lili Márk) IFS Working Paper W22/49 (November 2022)
We study the impact of a large payroll tax cut for older workers in Hungary. Motivated by the predictions of a standard equilibrium job search model, we examine the heterogeneous impact of the policy. Employment increases most at low-productivity firms oﬀering low-wage jobs, which tend to hire from unemployment, while the effects are more muted for high-productivity firms oﬀering high-wage jobs. At the same time, wages only increase at high-productivity firms. These results point to important heterogeneity in the incidence of payroll tax cuts across firms and highlight that payroll taxes have a significant impact on the composition of jobs in the labor market.
IFS Working Paper 22/49 | World Bank Policy Research Working Paper 10265 | CERS IE Working Paper 2022/23 | Summary on World Bank Let's Talk Development | Twitter Thread
Firm Consolidation and Labor Market Outcomes
(with Sabien Dobbelaere, Grace McCormack, and Sándor Sóvágó) IFS Working Paper W22/45 (November 2022)
Using rich administrative data from the Netherlands, we study the consequences of firm consolidation for workers. For workers at acquired firms, takeovers are associated with a 8.5% drop in employment at the consolidated firm and a 2.6% drop in total labor income. These effects are persistent even four years later. We show that the primary mechanism for this job loss is labor restructuring at consolidating firms. Specifically, workers with higher-than-expected pay relative to their human capital and workers with skills that are likely already present at acquirers are less likely to be retained.
IFS Working Paper W22/45 | IZA Discussion Paper 15724 | Summary on CEPR VoxEU | Summary on IZA World of Labor | Twitter Thread
Take-Up and Labor Supply Responses to Disability Insurance Earnings Limits
(with Judit Krekó and Andrea Weber) IFS Working Paper W22/20 (June 2022)
In most disability insurance programs beneficiaries lose some or all of their benefits if they earn above an earnings threshold. While intended to screen out applicants with high remaining working capacity, earnings limits can also distort the labor supply of beneficiaries. We develop a simple framework to evaluate this trade-off. We use a reduction in the earnings limit in Hungary to examine screening and labor supply responses. We find that the policy changed selection into the program modestly but reduced labor supply significantly. Viewed through the lens of our model, these findings suggest that the earnings threshold should be higher.
IFS Working Paper W22/20 | World Bank Policy Research Working Paper 10325 | IZA Discussion Paper 15377 | CERS IE Working Paper 2022/14 | Summary on World Bank Let's Talk Development
The Minimum Wage, Informal Pay, and Tax Enforcement
(with Anikó Bíró and László Sándor)
Journal of Public Economics, 215 (1): 104728, 2022.
We study the implications of the minimum wage for taxation in an environment with imperfect enforcement and informality. Leveraging an increase in the audit threat for declared earnings below a threshold at twice the minimum wage in Hungary, we estimate reporting and employment responses with administrative panel data. Our bunching and difference-in-differences results show that a substantial share of those who report earning the minimum wage earn at least the same amount off the books. Our key insight is that a taxed minimum wage serves as a backstop on underreporting and recovers some revenue—even though it also increases informality.
Paper | Online Appendix | Slides
IFS Working Paper W21/41 | CERS IE Working Paper 2020/43 | Summary on Defacto | Twitter Thread
Healthcare Rationing in Public Insurance Programs: Evidence from Medicaid
(with Tim Layton, Nicole Maestas, and Boris Vabson)
American Economic Journal: Economic Policy, 14 (4): 397-431, 2022.
We study two mechanisms used by public health insurance programs for rationing healthcare: outsourcing to private managed care plans and quantity limits for prescription drugs. Leveraging a natural experiment in Texas's Medicaid program, we find that the shift to managed care and the relaxation of a strict drug cap increased access to high-value drugs and outpatient services and reduced avoidable hospitalizations. Program costs increased significantly, indicating a trade-off between cost and quality. We provide suggestive evidence attributing the reduction in hospitalizations to the relaxation of the drug cap and much of the spending increase to the shift to managed care.
Paper | Online Appendix | Slides | Data and Code
NBER Working Paper 26042 | NBER Disability Research Center Paper NB 18-13 | Executive Summary | Summary in the NBER Bulletin on Retirement and Disability | Summary on Vox | Summary in the Brookings Hutchins Roundup | Summary on CEPR VoxEU | Cato Institute Research Briefs in Economic Policy No. 203 | Twitter Thread 1 | Twitter Thread 2
The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments
(with Tal Gross and Tim Layton)
American Economic Review: Insights, 4 (2): 175-190, 2022.
Insurance is typically viewed as a mechanism for transferring resources from good to bad states. Insurance, however, may also transfer resources from high-liquidity periods to low-liquidity periods. We test for this type of transfer from health insurance by studying the distribution of Social Security checks among Medicare recipients. When Social Security checks are distributed, prescription fills increase by 6–12 percent among recipients who pay small copayments. We find no such pattern among recipients who face no copayments. The results demonstrate that more-complete insurance allows recipients to consume healthcare when they need it rather than only when they have cash.
Paper | Online Appendix | Slides | Data and Code
NBER Working Paper 27977 | Summary in The Hill | Summary in Harvard Business Review | Presentation Video | Twitter Thread 1 | Twitter Thread 2 | Twitter Thread 3
Life Expectancy Inequalities in Hungary Over 25 Years: The Role of Avoidable Deaths
(with Anikó Bíró, Tamás Hajdu, and Gábor Kertesi)
Population Studies, 75 (3): 443-455, 2021.
Using mortality registers and administrative data on income and population, we develop new evidence on the magnitude of life expectancy inequality in Hungary and the scope for health policy in mitigating this. We document considerable inequalities in life expectancy at age 45 across settlement-level income groups, and show that these inequalities have increased between 1991–96 and 2011–16 for both men and women. We show that avoidable deaths play a large role in life expectancy inequality. Income-related inequalities in health behaviours, access to care, and healthcare use are all closely linked to the inequality in life expectancy.
HAS CERS IE Working Paper 2020/19 | Project Website | Summary on Index.hu | Summary on Portfolio | Summary on Defacto | Article review in Egészségfejlesztés
Disentangling Policy Effects Using Proxy Data: Which Shutdown Policies Affected Unemployment During the COVID-19 Pandemic?
(with Ed Kong)
Journal of Public Economics 189 (1): 104257, 2020.
We use high-frequency Google search data, combined with data on the announcement dates of non-pharmaceutical interventions (NPIs) during the COVID-19 pandemic in U.S. states, to disentangle the short-run direct impacts of multiple different state-level NPIs in an event study framework. Exploiting differential timing in the announcements of restaurant and bar limitations, non-essential business closures, stay-at-home orders, large-gatherings bans, school closures, and emergency declarations, we leverage the high-frequency search data to separately identify the effects of multiple NPIs that were introduced around the same time. We then describe a set of assumptions under which proxy outcomes can be used to estimate a causal parameter of interest when data on the outcome of interest are limited. Using this method, we quantify the share of overall growth in unemployment during the COVID-19 pandemic that was directly due to each of these state-level NPIs. We find that between March 14 and 28, restaurant and bar limitations and non-essential business closures can explain 6.0% and 6.4% of UI claims respectively, while the other NPIs did not directly increase own-state UI claims. This suggests that most of the short-run increase in UI claims during the pandemic was likely due to other factors, including declines in consumer demand, local policies, and policies implemented by private firms and institutions.
Paper | Slides | Data and Code
Healthcare Spending Inequality: Evidence from Hungarian Administrative Data
(with Anikó Bíró)
Health Policy 124 (3): 282-290, 2020.
Using administrative data on a random 50% of the Hungarian population, including individual-level information on incomes, healthcare spending, and mortality for the 2003-2011 period, we develop new evidence on the distribution of healthcare spending and mortality in Hungary by income and geography. By linking detailed administrative data on employment, income, and geographic location with measures of healthcare spending and mortality we are able to provide a more complete picture than the existing literature which has relied on survey data. We compute mean spending and 5-year and 8-year mortality measures by geography and income quantiles, and also present gender and age adjusted results.
We document four patterns: (i) substantial geographic heterogeneity in healthcare spending; (ii) positive association between labor income and public healthcare spending; (iii) geographic variation in the strength of the association between labor income and healthcare spending; and (iv) negative association between labor income and mortality. In further exploratory analysis, we find no statistically significant correlation between simple county-level supply measures and healthcare spending. We argue that taken together, these patterns suggest that individuals with higher labor income are in better health but consume more healthcare because they have better access to services.
Our work suggests new directions for research on the relationship between health inequalities and healthcare spending inequalities and the role of subtler barriers to healthcare access.
Paper | Slides | Data and Code
HAS CERS IE Discussion Paper 2019/9 | Project Website | Summary on Index.hu | Summary on Defacto | Summary on Qubit.hu | Article review in Egészségfejlesztés
Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges
(with Mike Geruso and Tim Layton)
American Economic Journal: Economic Policy 11 (2): 64-107, 2019.
We study insurers’ use of prescription drug formularies to screen consumers in the ACA Health Insurance Exchanges. We begin by showing that Exchange risk adjustment and reinsurance succeed in neutralizing selection incentives for most, but not all, consumer types. A minority of consumers, identifiable by demand for particular classes of prescription drugs, are predictably unprofitable. We then show that contract features relating to these drugs are distorted in a manner consistent with multi-dimensional screening. The empirical findings support a long theoretical literature examining how insurance contracts offered in equilibrium can fail to optimally trade-off risk protection and moral hazard.
Paper | Online Appendix | Slides | Data and Code
NBER Working Paper 22832 | Executive Summary | Summary on the Incidental Economist
Awarded the 2017 Mark A. Satterthwaite Award for Outstanding Research in Healthcare Markets
Labour Market Adjustment During the Coronavirus Pandemic: Results of a Representative Survey
(with Júlia Koltai and Gergely Röst)
The Hungarian Labour Market 2021, Chapter 2.5: 97-102, 2022.
Inequality of Mortality and Morbidity by Income
(with Anikó Bíró, Péter Elek, Tamás Hajdu, and Gábor Kertesi)
The Hungarian Labour Market 2020, Chapter 2.1: 86-92, 2021.
Labor Income, Health Status, and Healthcare Spending
(with Anikó Bíró)
The Hungarian Labour Market 2020, Chapter 3.1: 108-112, 2021.
Firm Characteristics and Health
(with Anikó Bíró and Márta Bisztray)
The Hungarian Labour Market 2020, Chapter 3.2: 113-118, 2021.
The Labor Market and Fertility Impacts of Decreasing the Compulsory Schooling Age
(with Anna Adamecz-Völgyi, Ágnes Szabó-Morvai, and Sunčica Vujić) CERS IE Working Paper 2021/40 (December 2021)
While an extensive literature investigates the effects of longer schooling, we know very little about what happens when compulsory schooling is shortened. This paper looks at the effects of a reform in Hungary that decreased the school leaving age from 18 to 16. We show that the reform increased the probability of being neither in education nor in employment and being inactive at ages 16-18 substantially while its effects on employment are not significantly different from zero in most specifications. These effects are similar among boys and girls but strongly heterogeneous by social background and ability. The reform had a moderate effect on teenage motherhood on average, but it increased the probability of giving birth substantially among the most disadvantaged girls. We conclude that through its heterogenous effects, the reform is expected to widen social inequalities.
The Early Labor Market Impacts of COVID-19 in Developing Countries: Evidence from High-Frequency Phone Surveys
(with Melanie Khamis, David Newhouse, Amparo Palacios-Lopez, Utz Pape, and Michael Weber) World Bank Policy Research Working Paper 9510 (January 2021)
The economic crisis caused by the COVID-19 pandemic has sharply reduced mobility and economic activity, disrupting the lives of people around the globe. This paper presents estimates on the early impact of the crisis on labor markets in 39 countries based on high-frequency phone survey data collected between April and July 2020. Workers in these countries experienced severe labor market disruptions following the COVID-19 outbreak. Based on simple averages across countries, 34 percent of the respondents reported stopping work, 20 percent of wage workers reported lack of payment for work performed, 9 percent reported job changes due to the pandemic, and 62 percent reported income loss in their household. Stopping work was more prevalent in the industrial and service sectors than in agriculture. Measures of work stoppage and income loss in the high-frequency phone survey are generally consistent with gross domestic product growth projections in Latin America and the Caribbean but not in Sub-Saharan Africa. This suggests that the survey data contribute new and important information on economic impacts in low-income countries.
World Bank Policy Research Working Paper 9510 | World Bank Jobs Working Paper 58 | World Bank JobsWatch Covid-19 Brief | World Bank Jobs Group Blog | World Bank Covid-19 High-Frequency Monitoring Dashboard
Employer Responsibility in Disability Insurance: Evidence from the Netherlands
(with Bastian Ravesteijn) Working Paper (November 2020)
We develop a framework to study optimal disability insurance when employers exhibit moral hazard and show that the optimal system takes into account employer-side moral hazard and selective hiring. We illustrate these insights using a reform in the Netherlands that extended experience rating to temporary workers. Using this reform, we document a 24% decrease in disability inflow. We also find an increase in worker selection, accounting for 14% of the overall decrease. Using our model, we evaluate the normative implications of the experience rating policy. We conclude that, given reasonable assumptions, the policy improved welfare and additional employer responsibility would further add to social welfare.
Predicting Disability Enrollment Using Machine Learning
(with Tim Layton, Helge Liebert, Nicole Maestas, and Boris Vabson) NBER Disability Research Center Paper NB 18-Q4 (November 2019)
We use data on enrollment in the Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) program and data on health care spending by Medicaid beneficiaries to analyze the extent to which Medicaid spending is predictive of future disability insurance receipt among non-disabled teenagers and future disability insurance disenrollment among disabled teenagers. In our first set of analyses, we find that we currently do not have enough data to predict future SSI and SSDI enrollment among non-disabled teenagers. In our second set of analyses, we find that observed Medicaid spending among disabled teenagers can be used to predict SSI disenrollment. Our results indicate that machine learning models using information on healthcare spending may be useful for identifying current teenage SSI recipients who are more or less likely to be removed from SSI.
NBER Disability Research Center Paper NB 18-Q4 | Executive Summary
Employers and Disability Insurance: Evidence from Individual Tax Returns
(with Ithai Lurie, Nicole Maestas, and Corbin Miller) Working Paper (September 2019)
We merge the universe of 2000-2018 W-2 earnings records to the universe of 2000-2018 SSA-1099 forms to estimate the Social Security Disability Insurance (SSDI) claiming rate of each employer's employees. We document large variation across industries in claiming rates. We also show that SSDI claiming rates correlate with characteristics of firms that signal firm quality. There is a positive association between firm size and employee SSDI claiming, except for the largest firms, which have lower employee claiming rates. In addition, we document a negative association between employee wages and SSDI claiming. In future work, we will estimate the relationship between employer and employee wage premiums and SSDI claiming.
Health and Economic Activity Over the Lifecycle: Literature Review
(with Mike Chernew, David Cutler, and Austin Frakt) NBER Working Paper 24865 (July 2018)
We systematically review the literature linking health to economic activity, particularly education and labor market outcomes, over the lifecycle. In the first part, we review studies that link childhood health to later-life outcomes. The main themes we focus on are in-utero exposures, birthweight, physical health and nutrition, mental health, and the environment. In the second part, we review studies of the impact of health on labor market success for adults. The main themes we focus on are the environment, disability, physical health shocks, within-household spillovers, cancer, and mental health.