PARC Working Paper Series
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Publication The Behavioral Economics of Altruism, Reciprocity, and Transfers within Families and Rural Communities: Evidence from Sub-Saharan Africa(2007-02-01) Chao, Li-wei; Kohler, Hans-PeterTransfers between strangers, neighbors, families, and spouses were examined using Triple Dictator Games (TDG, involving only givings) and Trust Games (TG, involving both givings and reciprocations) among 240 participants from 60 families in 20 villages in rural Malawi. In TDG, more was sent by those who were older, male, in better physical health, financially poorer, or frequent lenders of personal items, but less was sent to neighbors by participants with higher HIV felt stigma. In TG, higher transfers were associated with the expected amount of reciprocation, amount sent in TDG, and prior lending behavior; participants with high HIV stigmatization attitudes gave less, especially to their own families and spouses. Higher reciprocation in TG was associated with better mental health. Those with HIV stigmatization attitudes reciprocated differently, depending on whether their game-partner was the neighbor, family, or spouse. Social distance, physical and mental health, and HIV-stigma were predictors of transfers behavior.Publication An Analysis of the Medicare Prescription Drug Benefit(2006-08-01) Claudio, LucarelliMedicare has recently experienced the largest expansion of benefits since its in- ception: the inclusion of prescription drug coverage under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The policy debate has mainly focused on estimating the cost of implementing the new benefit, with little attention to the quantification of its impact on beneficiaries’ life expectancy, health status, and health-related behaviors. The policy came into effect in January 2006; therefore, no post-policy data are available yet. This paper develops and estimates a dynamic model of the demand for supplemental health insurance and different types of medical care, and uses the model to forecast the effects of the new Medicare benefit in a way that ex- plicitly takes into account the policy’s unique actuarial design and the dynamic features it includes. The results show that the new policy increases expenditure on prescription drugs by 24%, and has a positive effect on health status and life expectancy. There is a corresponding increase in the utilization of inpatient and outpatient care, due to the extension of life for people in poor health. The cost of extending life by a year is estimated to be between $38,000 and $62,000. The take-up rate of the new benefit reaches 85% by the fifth year of implementation, and there is a sizable crowding-out effect of private plans offering supplemental prescription drug coverage. The dynamic model is also used to evaluate the impact of alternative designs for the prescription drug benefit.Publication What Determines Adult Cognitive Skills? Impacts of Pre-Schooling, Schooling and Post-Schooling Experiences in Guatemala(2006-04-01) Behrman, Jere R; Hoddinott, John; Maluccio, John A; Soler-Hampejsek, Erica; Behrman, Emily L; Martorell, Reynaldo; Ramirez-Zea, Manuel; Stein, Aryeh DMost investigations of the importance of and the determinants of adult cognitive skills assume that (a) they are produced primarily by schooling and (b) schooling is statistically predetermined. But these assumptions may lead to misleading inferences about impacts of schooling and of pre-schooling and post-schooling experiences on adult cognitive skills. This study uses an unusually rich longitudinal data set collected over 35 years in Guatemala to investigate production functions for adult (i) reading-comprehension and (ii) non-verbal cognitive skills as dependent on behaviorally-determined pre-schooling, schooling and post-schooling experiences. Major results are: (1) Schooling has significant and substantial impact on adult reading comprehension (but not on adult non-verbal cognitive skills) —but estimates of this impact are biased upwards substantially if there is not control for behavioral determinants of schooling in the presence of persistent unobserved factors such as genetic endowments and/or if family background factors that appear to be correlated with genetic endowments are included among the first-stage instruments. (2) Both pre-schooling and post-schooling experiences have substantial significant impacts on one or both of the adult cognitive skill measures that tend to be underestimated if these pre- and post-schooling experiences are treated as statistically predetermined—in contrast to the upward bias for schooling, which suggests that the underlying physical and job-related components of genetic endowments are negatively correlated with those for cognitive skills. (3) The failure in most studies to incorporate pre- and post-schooling experiences in the analysis of adult cognitive skills or outcomes affected by adult skills is likely to lead to misleading over-emphasis on schooling relative to these pre-and post-schooling experiences. (4) Gender differences in the coefficients of the adult cognitive skills production functions are not significant, suggesting that most of the fairly substantial differences in adult cognitive skills favoring males on average originate from gender differences in completed grades of schooling and in experience in skilled jobs favoring males. These four sets of findings are of substantial interest in themselves. But they also have important implications for broader literatures, pointing to limitations in the cross-country growth literature of using schooling of adults to represent human capital, supporting hypotheses about the importance of childhood nutrition and work complexity in explaining the “Flynn effect” of substantial increases in measured cognitive skills over time, and questioning the interpretation of studies that report productivity impacts of cognitive skills without controlling for the endogeneity of such skills.Publication Childhood Conditions and Adult Health: Evidence from the Health and Retirement Study(1998-06-01) Elo, Irma T.Poor health and premature death are direct manifestations of biological processes influenced by genetic, environmental, and life style factors. These factors operate throughout the life course and interact in complex ways to produce observed differentials in adult health and mortality. To explain these differentials, authors of most studies have typically examined the role of adult environment, employing such explanatory factors as socioeconomic status (e.g., education, income and wealth), health-related behaviors (e.g., smoking and exercise), and social support (kin and social networks and marriage) (see for example Adler et al. 1994; Feinstein 1993; House et al. 1994; Kaplan and Keil 1993; Lillard and Waite 1995; Lynch et al. 1996; Menchik 1993; Preston and Taubaman 1994; Rogers et al. 1996).Publication “Ability" Biases in Schooling Returns and Twins: A Test and New Estimates(1997-12-19) Behrman, Jere R.; Rosenzweig, Mark R.Identical twins long have been used to control for “ability” in efforts to obtain unbiased estimates of the earnings impact of schooling and of biases in estimates that do not control for earnings endowments. This study (1) presents new estimates of schooling returns and of “ability” bias using a new twins sample, (2) develops and applies a test of the significance of that bias, and (3) demonstrates that there may be “ability” bias even if the genetically-endowed component of ability does not affect schooling decisions directly as long as this component of ability is correlated with other family characteristics such as income that do affect schooling and that it is not possible to identify separately these individual components of “ability” bias. The basic empirical result is that, net of measurement error, upward “ability” bias is statistically significant in OLS estimates, causing an overestimate of the schooling impact of 12%.Publication Health Problems as Determinants of Retirement: Are Self-Rated Measures Endogenous?(1998-03-01) Dwyer, Debra Sabatini; Mitchell, Olivia S.We explore alternative measures of unobserved health status in order to identify effects of mental and physical capacity for work on older men’s retirement. Traditional self-ratings of poor health are tested against more objectively measured instruments. Using the Health and Retirement Study (HRS), we find that health problems influence retirement plans more strongly than do economic variables. Specifically, men in poor overall health expected to retire one to two years earlier, an effect that persists after correcting for potential endogeneity of self-rated health problems. The effects of detailed health problems are also examined in depth.Publication Effects of Age Misreporting on Mortality Estimates at Older Ages(1997-09-01) Preston, Samuel H.; Elo, Irma T.; Stewart, QuincyThis study examines how age misreporting typically affects estimates of mortality at older ages. We investigate the effects of three patterns of age misreporting & age overstatement, age understatement, and symmetric age misreporting & on mortality estimates at ages 40 and above. We consider five methods to estimate mortality: conventional estimates derived from vital statistics and censuses; longitudinal studies where age is identified at baseline; variable-r procedures based on age distributions of the population; variable-r procedures based on age distributions of deaths; and extinct generation methods. For each of the age misreporting patterns and each of the methods of mortality estimation, we find that age misstatement biases mortality estimates downwards at the oldest ages.Publication Who Knows What About Their Pensions? Financial Literacy in the Chilean Individual Account System(2006-05-01) Skog, Jeremy OThis paper examines the question of what affiliates of the Chilean pension system know about their pension system, and whether they respond to incentives to learn more about their benefits depending on whether they stand to gain most from a particular aspect of the pension system. We rely on the 2004 Social Protection Survey (Encuesta de Prevision Social, EPS) to assess individuals’ financial literacy regarding several structural questions about their pension system. These questions are aggregated into several clusters, representing aspects of the pension life cycle, and literacy along these vectors of knowledge is assessed using an integer scoring system. Using multivariate regression, we show the older, healthier, more educated, married male workers know more about the system. Also, union members, those with higher incomes, and workers at larger companies are also more financially informed. We also find that knowledge varies by subject area; accordingly, it is important to ascertain what literacy shortfalls must be targeted before determining what education efforts might be useful. We also conclude that people become more pension literate, as that knowledge becomes more useful.Publication Childhood Conditions that Predict Survival to Advanced Ages Among African Americans(1997) Preston, Samuel H.; Hill, Mark E.; Drevenstedt, Greg LeeThis paper investigates the social and economic circumstances of childhood that predict the probability of survival to age 85. It uses a unique study design in which survivors are linked to their records in U.S. Censuses of 1900 and 1910. A control group of age and race-matched children is drawn from Public Use Samples for these censuses. It concludes that the factors most predictive of survival are farm background, having literate parents, and living in a two-parent household. Results support the interpretation that death risks are positively correlated over the life cycle.Publication Using Successive Censuses to Reconstruct the African-American Population, 1930-1990(1996-12-01) Preston, Samuel H.; Elo, Irma T.; Gale, LynnThe Census Bureau's program to estimate the completeness of decennial census counts for age, sex, and race groups relies principally upon what it terms "demographic analysis." The essence of this approach is to introduce extraneous information on the number of births, deaths, and migrations, derived from non-census sources, to estimate the true size of each birth cohort at the time of a census (Robinson et al., 1993; Himes and Clogg, 1992). Comparison of this alternative estimate to the census count provides an estimate of the degree of under - or over-enumeration in the census, often termed the census undercount. Acceptance of the estimated undercount implies that the census itself is irrelevant to estimating the true size of the population; whatever deficiencies it contained would be accurately and completely revealed by comparison to the estimate based on demographic analysis.