PARC Working Papers Copyright (c) 2013 University of Pennsylvania All rights reserved. http://repository.upenn.edu/parc_working_papers Recent documents in PARC Working Papers en-us Thu, 04 Apr 2013 01:41:03 PDT 3600 The E ffects of Child-Bearing Policies in Remarriages: Evidence from China http://repository.upenn.edu/parc_working_papers/38 http://repository.upenn.edu/parc_working_papers/38 Tue, 02 Apr 2013 08:44:13 PDT In this paper we document the fertility policies for remarried couples in the People's Republic of China, and investigate their effects on the women's first marriages. Our evidence suggests that the child-bearing policies in remarriages have a significant effect on the characteristics of first marriages, including the ages of first marriage for the women, age gap, age of first child birth, age lapsed between first marriage and first child birth, number of children, and the divorce rates. We also plan to investigate whether these results are consistent with a forward-looking marriage model.

]]> Hanming Fang et al. Semiparametric Bayesian Modeling of Income Volatility Heterogeneity http://repository.upenn.edu/parc_working_papers/37 http://repository.upenn.edu/parc_working_papers/37 Wed, 07 Nov 2012 12:35:00 PST Research on income risk typically treats its proxy—income volatility, the expected magnitude of income changes—as if it were unchanged for an individual over time, the same for everyone at a point in time, or both. In reality, income risk evolves over time, and some people face more of it than others. To model heterogeneity and dynamics in (unobserved) income volatility, we develop a novel semiparametric Bayesian stochastic volatility model. Our Markovian hierarchical Dirichlet process (MHDP) prior augments the recently developed hierarchical Dirichlet process (HDP) prior to accommodate the serial dependence of panel data. We document dynamics and substantial heterogeneity in income volatility.

]]> Shane T. Jensen et al. Identifying Idiosyncratic Career Taste and Skill with Income Risk http://repository.upenn.edu/parc_working_papers/36 http://repository.upenn.edu/parc_working_papers/36 Wed, 07 Nov 2012 12:31:49 PST How important to well-being is choosing a career with the right fit? This question is difficult to answer because we observe individuals only in their chosen careers, not in the other (presumably inferior) options they did not choose. To overcome this problem, we use expected utility to cardinalize a logit model of career choice in a setting where we observe the income risk of chosen careers and the risk-aversion of the people who choose them. The key parameter of interest - the importance of idiosyncratic taste and skill in career choice - is identified from the shift in the distribution of income risk with risk aversion. We estimate the model using individual-specific measures of income volatility to proxy for income risk and survey questions about hypothetical income gambles to proxy for risk preference, both from the PSID. We separate idiosyncratic career taste from skill using the pay gap between high and low-income risk people with high and low risk-aversion.

]]> Stephen H. Shore et al. Health Expenditure Risk and Annuitization: Evidence from Medigap Coverage http://repository.upenn.edu/parc_working_papers/35 http://repository.upenn.edu/parc_working_papers/35 Wed, 07 Nov 2012 12:21:56 PST Theoretical research suggests that health expenditure risk can have an ambiguous influence on the annuitization decisions of the elderly. I provide empirical evidence on this linkage, by estimating the impact of supplemental Medicare insurance (Medigap) coverage on the annuity demand of older Americans. I use local variation in prices as an instrumental variable to address the possible endogeneity of Medigap coverage, an identification strategy motivated by the fact that Medigap policies are not medically underwritten, and Medigap insurance is required by law to be standardized, so prices reflect neither individual characteristics nor product quality. Medigap coverage has a strong impact on annuitization: the extensive margin elasticity is 0.39, the overall elasticity of private annuity income with respect to Medigap coverage is 0.56. These results are robust to controls for health, wealth, and preferences, as well as other robustness tests. They imply that medical expenditure risk has a large impact on underannuitization.

]]> Daniel W. Sacks The Impact of the PROGRESA/Oportunidades Conditional Cash Transfer Program on Health and Related Outcomes for the Aging in Mexico http://repository.upenn.edu/parc_working_papers/34 http://repository.upenn.edu/parc_working_papers/34 Mon, 10 Oct 2011 12:54:41 PDT Conditional cash transfer (CCT) programs link public transfers to human capital investment in hopes of alleviating current poverty and reducing its intergenerational transmission. Whereas nearly all studies of their impacts have focused on youth, these CCT programs may also have an impact on aging adults, by increasing household resources or inducing changes in allocations of time of various household members, that may be of substantial interest, particularly given the rapid aging of most populations. This paper contributes to this under-researched area by examining health and work impacts on the aging for the best-known and most influential of these programs, the Mexican PROGRESA/Oportunidades program. For a number of health indicators, the program appears to significantly improve health, with impacts that are larger with a greater time receiving the program. However, most of these health impacts are concentrated on women.

]]> Jere R. Behrman et al. First-Round Impacts of the 2008 Chilean Pension System Reform http://repository.upenn.edu/parc_working_papers/33 http://repository.upenn.edu/parc_working_papers/33 Wed, 02 Mar 2011 12:47:50 PST Chile’s innovative privatized pension system has been lauded as possible model for Social Security system overhauls in other countries, yet it has also been critiqued for not including a strong safety net for the uncovered sector. In response, the Bachelet government in 2008 implemented reforms to rectify this shortcoming. Here we offer the first systematic effort to directly evaluate the reform’s impacts, focusing on the new Basic Solidarity Pension for poor households with at least one person age 65+. Using the Social Protection Survey, we show that targeted poor households received about 2.4 percent more household annual income, with little evidence of crowding-out of private transfers. We also suggest that recipient household welfare probably increased due to slightly higher expenditures on basic consumption including healthcare, more leisure hours, and improved self-reported health. While measured short-run effects are small, follow-ups will be essential to gauge longer-run outcomes.

]]> Jere R. Behrman et al. Financial Literacy, Schooling, and Wealth Accumulation http://repository.upenn.edu/parc_working_papers/32 http://repository.upenn.edu/parc_working_papers/32 Fri, 01 Oct 2010 07:55:05 PDT Financial literacy and schooling attainment have been linked to household wealth accumulation. Yet prior findings may be biased due to noisy measures of financial literacy and schooling, as well as unobserved factors such as ability, intelligence, and motivation that could enhance financial literacy and schooling but also directly affect wealth accumulation. Here we use a new household dataset and an instrumental variables approach to isolate the causal effects of financial literacy and schooling on wealth accumulation. While financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, our approach reveals even stronger and larger effects of financial literacy on wealth. It also indicates no significant positive effects of schooling attainment conditional on financial literacy in a linear specification, but positive effects when interacted with financial literacy. Estimated impacts are substantial enough to suggest that investments in financial literacy could have large positive payoffs.

]]> Jere R. Behrman et al. Early Life Conditions and Cause-Specific Mortality in Finland http://repository.upenn.edu/parc_working_papers/30 http://repository.upenn.edu/parc_working_papers/30 Tue, 02 Feb 2010 09:37:16 PST The purpose of this study is to investigate the relationship between early life socioeconomic status, household structure and adult all cause and cause-specific mortality in Finland during the latter half of the twentieth century. We base the analyses on a 10% sample of households drawn from the 1950 Finnish Census of Population with the follow-up of household members in subsequent censuses and death records beginning from the end of 1970 through the end of 1998. The Finnish data constitute a unique register based data set that does not rely on individual recall of early life social conditions, parental educational attainment, family type, and other life course trajectories. We find significant associations between early life social and family conditions on all cause mortality as well as mortality from cardiovascular and alcohol related diseases, accidents and violence; with protective effects of higher childhood SES varying between 10% and 30%. These associations are mediated through adult educational attainment and other socio-demographic characteristics. The results imply that long-term adverse health consequences of disadvantaged early life social circumstances may be mitigated by investments in educational and employment opportunities in early adulthood.

]]> Irma T. Elo Inaccurate age and sex data in the Census PUMS files: Evidence and Implications http://repository.upenn.edu/parc_working_papers/29 http://repository.upenn.edu/parc_working_papers/29 Mon, 01 Feb 2010 10:49:48 PST We discover and document errors in public use microdata samples ("PUMS files") of the 2000 Census, the 2003-2006 American Community Survey, and the 2004-2009 Current Population Survey. For women and men ages 65 and older, age- and sex-specific population estimates generated from the PUMS files differ by as much as 15% from counts in published data tables. Moreover, an analysis of labor force participation and marriage rates suggest the PUMS samples are not representative of the population at individual ages for those ages 65 and over. PUMS files substantially underestimate labor force participation of those near retirement ages and overestimate labor force participation rates of those at older ages. These problems were an unintentional by-product of the misapplication of a newer generation of disclosure avoidance procedures carried out on the data. The resulting errors in the public use data could significantly impact studies of people ages 65 and older, particularly analyses of variables that are expected to change by age.

]]> Betsey Stevenson Women's Education and Family Behavior: Trends in Marriage, Divorce and Fertility http://repository.upenn.edu/parc_working_papers/28 http://repository.upenn.edu/parc_working_papers/28 Mon, 01 Feb 2010 10:49:47 PST This paper examines how marital and fertility patterns have changed along racial and educational lines for men and women. Historically, women with more education have been the least likely to marry and have children, but this marriage gap has eroded as the returns to marriage have changed. Marriage and remarriage rates have risen for women with a college degree relative to women with fewer years of education. However, the patterns of, and reasons for, marriage have changed. College educated women marry later, have fewer children, are less likely to view marriage as “financial security”, are happier in their marriages and with their family life, and are not only the least likely to divorce, but have had the biggest decrease in divorce since the 1970s compared to women without a college degree. In contrast, there have been fewer changes in marital patterns by education for men.

]]> Betsey Stevenson Personal Attributes and the Financial Well-Being of Older Adults: The Effects of Control Beliefs http://repository.upenn.edu/parc_working_papers/27 http://repository.upenn.edu/parc_working_papers/27 Tue, 06 Oct 2009 11:37:33 PDT As the baby-boom population ages, adults are expected to take greater responsibility and control of their financial situation, but often are not equipped to assume that responsibility. This lack of control of one's finances exposes individuals to financial risk, potentially resulting in a reduced standard of living in retirement. This study explores the relationship between the personal attributes of older adults and their financial well-being, measured as financial satisfaction, while focusing on the mediating effects of control beliefs, defined as general sense of control and domain-specific levels of control related to work, health, and finances.

Responses from two components of the Health and Retirement Study (HRS), the core survey and a psychosocial leave-behind questionnaire (LBQ) administered in 2006, were merged and used to test a mediation model. Using a series of regression analyses and a sample of approximately 7400 adults, aged 51 and greater, the findings provide some support of the four hypothesized models. The results of this study indicate that general sense of control and domain-specific control beliefs have a comparable influence on the relationship between personal attributes and the financial satisfaction of the older adult population.

]]> Karen A. Zurlo Pension Payouts in Chile: Past, Present, and Future Prospects http://repository.upenn.edu/parc_working_papers/26 http://repository.upenn.edu/parc_working_papers/26 Tue, 01 Sep 2009 08:28:43 PDT One of the most interesting features of the Chilean pension system is that approximately two-thirds of all retirees purchase annuities, resulting in annuitization rates much higher than in other countries. In this paper we review recent developments in the payout market for Chilean pensions, focusing particularly on the role of annuities, and we discuss what makes the payout market in Chile so different from those in other nations.

]]> Olivia S. Mitchell et al. Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets http://repository.upenn.edu/parc_working_papers/25 http://repository.upenn.edu/parc_working_papers/25 Tue, 18 Aug 2009 12:30:34 PDT This paper develops a consumption and portfolio-choice model of a retiree who allocates wealth in four asset classes: a riskless bond, a risky asset, a real annuity, and housing. The retiree chooses health expenditure endogenously in response to stochastic depreciation of health. The model is calibrated to explain the joint dynamics of health expenditure, health, and asset allocation for retirees in the Health and Retirement Study, aged 65 and older. The calibrated model is used to assess the welfare gain from private annuitization. The welfare gain ranges from 13 percent of wealth at age 65 for those in worst health, to 18 percent for those in best health.

]]> Motohiro Yogo Reforms to an Individual Account Pension System and their Effects on Work and Contribution Decisions: The Case of Chile http://repository.upenn.edu/parc_working_papers/23 http://repository.upenn.edu/parc_working_papers/23 Tue, 09 Dec 2008 08:12:22 PST This study evaluates the effect of Chile’s pension system rules and regulations on individuals’ contribution and working decisions. In 1980 Chile was the first country to switch from a pay-as-you-go system to a privatized system based on individual investment accounts; then it has since been a model for pension reforms in many other Latin American countries. The Chilean system has also been considered by U.S. policy makers as a possible prototype for reform. This paper develops and estimates a dynamic behavioral model of individual decision-making about formal or informal sector employment and about pension contributions, accounting for regulations that govern the timing and level of pension benefits. Model parameters are obtained by the method of simulated maximum likelihood applied to longitudinal data from a new household survey, the Social Protection Survey (2002 to 2004), and administrative data from the pension regulatory agency. The estimated model is used to simulate the impact on employment and contribution patterns of changing the system rules. Reducing the number of quarters required to obtain the Minimum Pension and increasing the size of that pension increases work in the formal sector and contributions in the informal sector.

]]> Viviana Vélez-Grajales How Beliefs about HIV Status Affect Risky Behaviors: Evidence from Malawi http://repository.upenn.edu/parc_working_papers/22 http://repository.upenn.edu/parc_working_papers/22 Wed, 08 Oct 2008 08:31:15 PDT Many HIV testing programs in Africa and elsewhere aim to reduce risk-taking behaviors by providing individuals with information about their own HIV status. This paper examines how beliefs about own HIV status affect risky sexual behavior using data from married couples living in three regions of Malawi. Risky behavior is measured as the propensity to engage in extramarital affairs or to not use condoms. The empirical analysis is based on two panel surveys for years 2004 and 2006 from the Malawi Diffusion and Ideational Change Project (MDICP) and from an experimental HIV testing intervention carried out in 2004 that provided randomized incentives for picking up test results. Most individuals participating in the MDICP testing learned that they were HIV negative and a small fraction that they were positive. Controlling for potential endogeneity between beliefs and risk-taking, we find that downward revisions in the subjective belief of being HIV positive lead to decreases in the propensity to engage in extra-marital affairs but have no effect on condom use. These results are generally supported by survey questions that directly elicited from respondents how participating in testing altered their behavior. We show that the estimates provide a lower bound in the presence of measurement error in extra-marital affairs.

]]> Aureo de Paula et al. How Universal School Vouchers Affect Educational and Labor Market Outcomes: Evidence from Chile http://repository.upenn.edu/parc_working_papers/21 http://repository.upenn.edu/parc_working_papers/21 Fri, 12 Sep 2008 11:31:26 PDT This paper studies the effects of school vouchers in Chile, which adopted a nationwide school voucher program 28 years ago. Chile has a relatively unregulated, decentralized, competitive market in primary and secondary education and therefore provides a unique setting in which to study how voucher programs affect school choice as well as educational attainment and labor market outcomes. This paper develops and estimates a dynamic model of schooling and work decisions using data from the 2002 Historia Laboral y Seguridad Social and the 2004 Enquesta Proteccion Social (EPS) surveys. The dataset includes rich demographic information as well as contemporaneous and retrospective schooling and work information covering a thirty-five year time frame. Some individuals in the sample completed their schooling before the voucher program was introduced, while others had the option of using the vouchers over part or all of their schooling careers. The impacts of the voucher program are identified from the differences in the schooling and work choices made and wage returns received by individuals differentially exposed to the program. Simulations based on the estimated dynamic model indicate that the school voucher program induced individuals affected by the program to attend private subsidized schools at a higher rate, achieve higher educational attainment, receive higher wages and participate more in the labor force. Returns to both public and private education increased after the introduction of vouchers. An examination of distributional effects shows that the voucher program benefitted individuals from both poor and non-poor backgrounds, but that the non-poor experienced greater benefits.

]]> David Bravo et al. The Effects of Early Childhood Diseases on Young Adult Health in Guatemala http://repository.upenn.edu/parc_working_papers/20 http://repository.upenn.edu/parc_working_papers/20 Wed, 03 Sep 2008 07:48:18 PDT This study examines the relationship between early childhood morbidity and young adult health in a poor developing country with a high prevalence of childhood diseases. I take advantage of the rich observational data collected by the Institute of Nutrition of Central America and Panama (INCAP) Longitudinal Study in Guatemala to estimate the effects of five types of childhood illnesses on metabolic syndrome in young adulthood, a predictor of cardiovascular disease and type 2 diabetes. This analysis supports the hypothesis that poor health in childhood is associated with a higher probability of metabolic syndrome in young adulthood. I also find that adult height, often used as a proxy for childhood conditions, does not capture the effects of childhood morbidity. Thus, studies that include height but no direct measure of childhood morbidity are likely to underestimate the effects of child health on later life outcomes. The results highlight the significance of child health programs that can improve population health over the life course.

]]> Rachel Margolis The Dynamics of Lifecycle Investing in 401(k) Plans http://repository.upenn.edu/parc_working_papers/19 http://repository.upenn.edu/parc_working_papers/19 Wed, 20 Aug 2008 12:15:07 PDT The introduction of lifecycle funds into 401(k) plans offers a rich environment in which to assess workers’ portfolio allocation decisions. Consistent with behavioral models, employer design decisions strongly influence lifecycle adoption behavior while fundamentally altering portfolio characteristics, both in the cross-section and longitudinally. Yet there are also elements of rational choice by new employees, as well as choice constrained by information costs among workers with low literacy characteristics. We conclude that recent legislation encouraging riskier 401(k) portfolios will modify investment patterns, with the rate of change varying according to whether behavioral or rational elements dominate in a given setting.

]]> Olivia S. Mitchell et al. Poverty and Proximate Barriers to Learning: Vision Deficiencies, Vision Correction and Educational Outcomes in Rural Northwest China http://repository.upenn.edu/parc_working_papers/18 http://repository.upenn.edu/parc_working_papers/18 Tue, 05 Aug 2008 10:22:08 PDT Few studies of educational barriers in developing countries have investigated the role of children’s vision problems, despite the self-evident challenge that poor vision poses to classroom learning and the potential for a simple ameliorative intervention. We address this gap with an analysis of two datasets from Gansu Province, a highly impoverished province in northwest China. One dataset is the Gansu Survey of Children and Families (GSCF, 2000 and 2004), a panel survey of 2,000 children in 100 rural villages; the other is the Gansu Vision Intervention Project (GVIP, 2004), a randomized trial involving 19,185 students in 165 schools in two counties. Results attest to significant unmet need for vision correction. About 11 percent of third to fifth graders in the GVIP and about 17 percent of 13 to 16 year olds in the GSCF had diagnosed vision problems. Yet, just 1 percent of the GVIP sample and 7 percent of the GSCF sample wore glasses in 2004, and access to vision correction shows a sharp socioeconomic gradient in both datasets. Importantly, vision problems themselves are actually selective of higher socioeconomic status children and more academically engaged students, a finding that poses challenges to isolating the causal impact of glasses-wearing. Propensity score matching estimates based on the GSCF suggest a significant effect of glasses-wearing on standardized math and literacy tests, though not on language tests. Analysis of the GVIP intervention shows that those who received glasses were less likely to fail a class. While we cannot firmly rule out all sources of selectivity, findings are consistent with the commonsense notion that correcting vision supports learning. The high level of unmet need for vision correction, together with evidence suggesting that wearing glasses supports learning, indicates the potential value of this simple intervention for students in developing country settings. The selectivity issues involved in the analysis indicate the need for further empirical studies that test the impact of vision correction on learning.

]]> Emily Hannum et al. Health of Native-born and Foreign-born Black Residents in the United States: Evidence from the 2000 Census of Population and the National Health Interview Survey http://repository.upenn.edu/parc_working_papers/17 http://repository.upenn.edu/parc_working_papers/17 Tue, 05 Aug 2008 10:14:55 PDT Utilizing the 5% Public Use Micro Data Sample (PUMS) from the 2000 Census of Population and 2000-2006 waves of the National Health Interview Survey (NHIS), we examine differences in disability, self-rated health and chronic conditions among native-born and foreign-born black US residents. Among the foreign-born, we distinguish among immigrants from the Caribbean /West Indies, Africa, Europe and other regions of the world, as well as by Hispanic origin. Results from both data sets point to an immigrant health advantage across all measures of health for all groups except for the European-born. Black immigrants from Europe reported similar levels of hypertension as U.S.-born non-Hispanic blacks. Our results also suggest that the Hispanic health “paradox” does not apply to Hispanics who self-identify as black.

]]> Irma Elo et al.