We study a dynamic macro model to capture the trade-off between policies that simultaneously decrease output and the rate of infection transmission. We find that, in many cases, optimal policies require sharp initial decreases in employment followed by a partial liberalization that occurs before the peak of the epidemic. The arrival of a vaccine (even if only a small fraction of the population is initially vaccinated) requires a significant relaxation of stay-at-home policies and, in some cases, results in an increase in the speed of infection. The model implies that the monetary value of producing a vaccine is high at the beginning of the epidemic but it decreases rapidly as time passes. We find that the value that society assigns to averting deaths is a major determinant of the optimal policy.
Health Inequality: Role of Insurance and Technological Progress. New Version Coming Soon! (older version available upon request)
The paper investigates the role of insurance and technological progress on the rising health inequality across income groups and its aggregate output costs for the US. We develop a continuous-time life-cycle model of an economy where individuals decide consumption-hours worked, whether to take up health insurance, when to visit a doctor, how much to invest in their health capital and whether to engage in bad behavior. A simple version of the model is able to explain about 50% of the gap in life-expectancy across income groups observed in data. In our model, consistent with the pattern in data, uninsured individuals, having deferred the treatment aren’t able to reap the benefits of the technological progress, thus resulting in poorer outcomes. The policy simulation with a plausible public health insurance scheme reduces the disparity in health outcomes to half. We use National Longitudinal Mortality Survey (NLMS), Mortality Differentials Across Communities (MDAC) and linked National Health Interview Survey (NHIS)- Medical Expenditures Panel Survey (MEPS) data to estimate the parameters of the model. As a cross-validation exercise using National Longitudinal Mortality Survey (NLMS) data, we exploit the state variation in Medicaid eligibility and find that among the working age individuals with low family income, Medicaid reduces the probability of dying by 9%. Using propensity score matching estimator, we find that private insurance reduces the probability of dying by upto 25% when compared to the uninsured.
Presentations: USC Marshall Macro Day*; Dissertation Workshop, Federal Reserve Bank of St. Louis*; Essen Health Conference*; YES2020*; Econ Brown Bag, Olin Business School; WEAI; 2020 Kansas Health Economics Conference; Fall 2019 Midwest Macroeconomics Meetings; Fall 2019 Midwest Economics Theory; Econ Brown Bag, Olin Business School; EEA-ESEM 2019; 2019 SED Annual Meeting; 2019 ASHEcon; 2019 Midwest Economics Association/SOLE; Fall 2018 Midwest Macroeconomics Meetings; 2018 EGSC; 2018 EEA-ESEM; CHEPAR Meeting, Institute for Public Health, WashU
We model a firm as a collection of managers who coordinate on joint production. The firm-level production technology features increasing returns to the number of managers and complementarity across managers of heterogeneous skills. Individuals are born into families that differ in size and managerial skill endowment. Each member of a family has the option to (i) work as a manager in the family firm; (ii) work as a manager in a non-family firm; or (iii) supply non-managerial labor for a wage. Non-family firms are constrained by a basic moral-hazard constraint: individual managers can steal a fraction of the joint output and forgo their managerial remunerations. The fraction that they may steal can be reduced by costly monitoring, which determines the optimal size of the firm. The limitation of family firms is, naturally, that the size and the managerial skill endowment of a family are exogenously given and immutable. We use a rich firm-level dataset from India augmented with household-level data using IPUMS and ASER to estimate the parameters of the model and quantify the role of such constraints on the organization of production and output per worker across 46 countries present in Global Entrepreneurship Monitor.