The B.E. Journal of Economic Analysis & Policy

Published by De Gruyter

Volume 18 Issue 1 -

January 2018

Issue of The B.E. Journal of Economic Analysis & Policy

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Contents
Journal Overview

Research Article

January 23, 2018

Do Firms with Low Disability Risks Opt Out from Public to Private Insurance?

Wolter H.J. Hassink, Pierre Koning, Wim Zwinkels

Article number: 20170022

Abstract

In the Netherlands, firms may opt out from public to private disability insurance (DI). Opponents of this “mixed market” for insurance argue that it may trigger a segmentation between firms with high risks with public insurance and low disability risks with private insurance. This article tests the importance of such risk segmentation, using administrative information on DI benefits and opting-out decisions of a panel of about 250,000 Dutch firms between 2007 and 2011. We find strong selection into private insurance of firms with low recent DI inflow rates and low current sickness rates. Accordingly, private insurers succeeded in attracting firms with low anticipated DI benefit costs in the first years to come. Our results also suggest that these effects are transitory – that is, firms that opted out have DI risks that are not structurally lower.

January 23, 2018

A Theory of Inefficient College Entry and Excessive Student Debt

Viktar Fedaseyeu, Vitaliy Strohush

Article number: 20160304

Abstract

When workers are myopic and the amount of financing provided by the government is sufficiently large, some workers acquire education even if they are better off without it. We show that government-provided loans generate a propagation mechanism that exacerbates inefficient college entry. Further, the extent of this inefficiency depends on the speed at which loans are provided, and not just on their amount. The extent of inefficient college entry also depends on the distribution of myopic workers in the population, and inefficiencies can arise even if not all workers are myopic. We extend the model to study the impact of the dropout rate and heterogeneous expectations as well the dynamic implications of inefficient college entry.

January 23, 2018

Editor Reputation and Journal Quality: The Case of Regional Economic Association Journals

João R Faria, Franklin G Mixon, Kamal P Upadhyaya

Article number: 20170099

Abstract

This study provides a formal game that explores how editor reputation and rent seeking play a part in scholarly research that involves regional economic association journals. The game asserts that a regional economic association journal’s reputation is determined by the academic reputation of its editor, the academic reputation of the department wherein the journal is housed, and, among other things, rent seeking by scholars. Evidence from the two most prominent regional economic association journals in the United States, namely Economic Inquiry and the Southern Economic Journal , generally support these aspects of the formal game.

January 23, 2018

Performance, Luck and Equality: An Experimental Analysis of Subjects’ Preferences for Different Allocation Criteria

Leonardo Becchetti, Giacomo Degli Antoni, Stefania Ottone, Nazaria Solferino

Article number: 20160259

Abstract

We perform an experimental analysis to investigate participants’ choices of allocative criteria under different conditions. We document that performance-based criteria guaranteeing a minimal egalitarian base are widely preferred by both neutral spectators and stakeholders without information on relative payoffs, although popularity among stakeholders is mostly due to self-interest considerations and optimism concerning their expected performance. Information regarding the distribution of payoffs under different criteria dramatically reduces such choice because the self-interest motive directly emerges, and most players opt to revise their decision in favor of the criterion maximizing their own payoff.

January 23, 2018

Public Health Insurance with Monopolistically Competitive Providers and Optional Spot Sales

Gilad Sorek, T. Randolph Beard

Article number: 20160309

Abstract

We study the implications of extending public-insurance coverage over differentiated medical products of the same therapeutic group to market outcomes. The public insurer can set the reimbursement level for medical providers and the copayment for the insured for medical care provided under the policy coverage, but cannot directly control providers’ spot sales (outside of insurance) price. In this setup, the price offered by the public insurer to medical providers must maintain their reservation profit from selling on the spot market directly to consumers. We show that the public insurer can manipulate this reservation profit by setting the copayment rate, and thereby promote market welfare while increasing consumers’ surplus due to lower medical prices and lower market entry. The results survive generalizations including moral hazard and incomplete insurance coverage.

January 23, 2018

Optimal Reimbursement Policy in Health Care: Competition, Ownership Structure and Quality Provision

Rune Stenbacka, Mihkel Tombak

Article number: 20170122

Abstract

We analytically characterize the effects of ownership and competition in the healthcare industry on quality provision, market coverage and optimal reimbursement policy. A for-profit monopoly selects a lower quality than a nonprofit supplier, and the socially optimal reimbursement rate with a nonprofit monopoly exceeds that with a for-profit monopoly. We establish that the optimal repayment policy is invariant to the introduction of competition by a for-profit high-quality supplier. Thus, market coverage is invariant to the introduction of competition, whereas consumers with a higher willingness to pay for quality are better off with competition.

January 23, 2018

Effects of Minimum Wages on Absence from Work Due to Illness

Juan Du, J. Paul Leigh

Article number: 20170097

Abstract

Using longitudinal data from the Panel Study of Income Dynamics for 1997–2013 and difference-in-differences (DD) and difference-in-difference-in-differences (DDD) techniques, we estimate the effects of minimum wages on absence from work due to own and others’ (such as children’s) illnesses. We use person fixed effects within both linear and two-part models, the latter to explore changes at extensive and intensive margins. A lower educated group (likely affected by minimum wages) is compared with higher educated groups (likely unaffected). Within the lower educated group, we find higher minimum wages are associated with lower rates of absence due to own and others’ illness combined and due to own illness alone, but not associated with absence due to others’ illness. A $1 increase in the real minimum wage results in 19 % (in DD model) and 32 % (DDD) decreases in the absence rate due to own illness evaluated at the mean. These findings are strongest for persons who are not employed year-round and among the lowest wage earners. In additional analysis, we show that these effects are likely not due to changes in labor supply or job-related attributes. Instead, we find a possible mechanism: higher minimum wages improve self-reported health for lower educated workers.

January 23, 2018

Warrantless Arrest Laws for Domestic Violence: How Are Youth Affected?

Kabir Dasgupta, Gail Pacheco

Article number: 20170114

Abstract

This study empirically examines the impact of warrantless arrest laws (designed to deter domestic violence) on multiple youth outcomes. Utilizing variation in the timing of implementation of the laws across states, and employing a difference in differences framework, we examine both the direct and indirect impacts on youth in the United States. There appears to be no significant direct link between warrantless arrest laws and domestic violence-related homicides. However, on the indirect front, we do find strong evidence that implementation of the arrest laws results in a drop in the probability of youth experiencing suicidal ideation. This analysis also accounts for important heterogeneities in laws across states, and our findings are robust to multiple sensitivity checks, aimed at addressing key threats to identification.

Letter

January 23, 2018

Is There Really a Trade-Off? Family Size and Investment in Child Quality in India

Mehtabul Azam, Chan Hang Saing

Article number: 20170098

Abstract

We address the relationship between number of children and investment in child quality, known as quantity–quality (Q–Q) trade-off, for India. Using a number of investment and outcome measures, we find that the OLS estimates suggest the presence of Q–Q trade-offs in nine out of ten measures considered. Using the gender of the first-born child as an instrument, the trade-offs in all measures disappear. Given the concerns about the exogeneity of the instrument, we apply Oster (2016) bounds to assess the sensitivity of OLS estimates to omitted variables. We find robust trade-off estimates in three measures currently enrolled in school, years of schooling and height-for-age. The results are more robust when observing trade-offs in rural areas. Trade-offs appear in ever enrolled in school, private school attendance, expenditure on education and private coaching in addition to the trade-offs in the three measures for all India sample.

January 23, 2018

Pay for Performance with Motivated Employees

Claudia Cerrone, Ester Manna

Article number: 20170190

Abstract

Heterogeneity in intrinsic motivation affects the optimal contract offered to employees in teams. Under individual incentives, the effort exerted by both motivated and selfish employees is distorted. This distortion is mitigated if employees receive a wage based on team performance. As a result, the principal prefers to use team incentives, while motivated employees are better off with individual incentives.

About this journal

Objective
The B.E. Journal of Economic Analysis & Policy (BEJEAP) welcomes submissions that employ microeconomics to analyze issues in organizational economics, consumer behavior, and public policy. Articles submitted to BEJEAP can come in two formats: research papers and letters. Authors should bring to their analysis whatever microeconomic theoretical, experimental or econometric tools are helpful. We publish both empirical work and applied theory (though not more abstract forms of applied theory), and our aim is to disseminate papers that have practical implications for public policy, organizational or individual decision making.

Topics

Design of organizations and institutions
Industrial organization
Health economics
Public finance
Labour Economics
Economics of education, family, development, law, or the environment
Effects of domestic and international policy

Article formats
Research Papers, Letters

> Information on submission process