A sequential model for older workers’ labor transitions after a health shock

In this work we study older workers (50 64) labor force transitions after a health/disability shock. We find that the probability of keeping working decreases with both age and severity of the shock. Moreover, we find strong interactions between age and severity in the 50 64 age range and none in the 30 49 age range. Regarding demographics we find that being female and married reduce the probability of keeping work. On the contrary, being main breadwinner, education and skill levels increase it. Interestingly, the effect of some demographics changes its sign when we look at transitions from inactivity to work. This is the case of being married or having a working spouse. Undoubtedly, leisure complementarities should play a role in the latter case. Since the data we use contains a very detailed information on disabilities, we are able to evaluate the marginal effect of each type of disability either in the probability of keeping working or in returning back to work. Some of these results may have strong policy implications.

The significance of distributive effects in social assessment of health care

In this paper we address the importance of distributive effects in the social valuation of QALY's. We propose a social welfarefunction that generalises the functions traditionally used in the health economic literature. The novelty is that, depending on the individual health gains, our function can representeither preferences for concentrating or preferences for spreading total gain or both together, an issue which has notbeen addressed until now. Based on an experiment, we observe that this generalisation provides a suitable approximation tothe sampled social preferences.

Wage inequality and unemployment with overeducation

A skill-biased change in technology can account at once for the changes observed in a number of important variables of the US labour market between 1970 and 1990. These include the increasing inequality in wages, both between and within education groups, and the increase in unemployment at all levels of education. In contrast, in previous literature this type of technology shock cannot account for all of these changes. The paper uses a matching model with a segmented labour market, an imperfect correlation between individual ability and education, and a fixed cost of setting up a job. The endogenous increase in overeducation is key to understand the response of unemployment to the technology shock.

Launching prices for new pharmaceuticals in heavily regulated and subsidized markets

This paper provides empirical evidence on the explanatory factorsaffecting introductory prices of new pharmaceuticals in a heavilyregulated and highly subsidized market. We collect a data setconsisting of all new chemical entities launched in Spain between1997 and 2005, and model launching prices. We found that, unlike inthe US and Sweden, therapeutically "innovative" products are notoverpriced relative to "imitative" ones. Price setting is mainly used asa mechanism to adjust for inflation independently of the degree ofinnovation. The drugs that enter through the centralized EMAapproval procedure are overpriced, which may be a consequence ofmarket globalization and international price setting.

Macroprudential policy, countercyclical bank capital buffers and credit supply: Evidence from the Spanish dynamic provisioning experiments

We analyze the impact of countercyclical capital buffers held by banks on the supplyof credit to firms and their subsequent performance. Spain introduced dynamicprovisioning unrelated to specific bank loan losses in 2000 and modified its formulaparameters in 2005 and 2008. In each case, individual banks were impacteddifferently. The resultant bank-specific shocks to capital buffers, coupled withcomprehensive bank-, firm-, loan-, and loan application-level data, allow us toidentify its impact on the supply of credit and on real activity. Our estimates showthat countercyclical dynamic provisioning smooths cycles in the supply of credit andin bad times upholds firm financing and performance.

The effects of a universal child benefit

I study the impact of a universal child benefit on fertility and family well-being. I exploitthe unanticipated introduction of a new, sizeable, unconditional child benefit in Spain in2007, granted to all mothers giving birth on or after July 1, 2007. The regressiondiscontinuity-type design allows for a credible identification of the causal effects. I find thatthe benefit did lead to a significant increase in fertility, as intended, part of it coming froman immediate reduction in abortions. On the unintended side, I find that families whoreceived the benefit did not increase their overall expenditure or their consumption ofdirectly child-related goods and services. Instead, eligible mothers stayed out of the laborforce significantly longer after giving birth, which in turn led to their children spending lesstime in formal child care and more time with their mother during their first year of life. Ialso find that couples who received the benefit were less likely to break up the year afterhaving the child, although this effect was only short-term. Taken together, the resultssuggest that child benefits of this kind may successfully increase fertility, as well asaffecting family well-being through their impact on maternal time at home and familystability.

Transition probabilities and duration analysis among disability states: Some evidence from Spanish data

In this paper we study the disability transition probabilities (as well as the mortalityprobabilities) due to concurrent factors to age such as income, gender and education. Althoughit is well known that ageing and socioeconomic status influence the probability ofcausing functional disorders, surprisingly little attention has been paid to the combined effectof those factors along the individuals' life and how this affects the transition from one degreeof disability to another. The assumption that tomorrow's disability state is only a functionof the today's state is very strong, since disability is a complex variable that depends onseveral other elements than time. This paper contributes into the field in two ways: (1) byattending the distinction between the initial disability level and the process that leads tohis course (2) by addressing whether and how education, age and income differentially affectthe disability transitions. Using a Markov chain discrete model and a survival analysis, weestimate the probability by year and individual characteristics that changes the state of disabilityand the duration that it takes its progression in each case. We find that people withan initial state of disability have a higher propensity to change and take less time to transitfrom different stages. Men do that more frequently than women. Education and incomehave negative effects on transition. Moreover, we consider the disability benefits associatedto those changes along different stages of disability and therefore we offer some clues onthe potential savings of preventive actions that may delay or avoid those transitions. Onpure cost considerations, preventive programs for improvement show higher benefits thanthose for preventing deterioration, and in general terms, those focussing individuals below65 should go first. Finally the trend of disability in Spain seems not to change among yearsand regional differences are not found.

The distribution of talent across contests

Do the contests with the largest prizes attract the most able contestants? Towhat extent do contestants avoid competition? In this paper, we show, theoreticallyand empirically, that the distribution of abilities plays a crucial role in determiningcontest choice. Sorting exists only when the proportion of high-ability contestantsis sufficiently small. As this proportion increases, contestants shy away from competitionand sorting decreases, such that, reverse sorting becomes a possibility. Wetest our theoretical predictions using a large panel data set containing contest choiceover three decades. We use exogenous variation in the participation of highly-ablecompetitors to provide empirical evidence for the relationship among prizes, competition,and sorting.

Civil conflict and human capital accumulation: The long-term effects of political violence in Perú

This paper provides empirical evidence of the persistent effect of exposure to political violence on humancapital accumulation. I exploit the variation in conflict location and birth cohorts to identify the longandshort-term effects of the civil war on educational attainment. Conditional on being exposed toviolence, the average person accumulates 0.31 less years of education as an adult. In the short-term,the effects are stronger than in the long-run; these results hold when comparing children within thesame household. Further, exposure to violence during early childhood leads to permanent losses. I alsoexplore the potential causal mechanisms.

Structural unemployment

Structural unemployment is due to mismatch between available jobs and workers.We formalize this concept in a simple model of a segmented labor market with searchfrictions within segments. Worker mobility, job mobility and wage bargaining costsacross segments generate structural unemployment. We estimate the contribution ofthese costs to fluctuations in US unemployment, operationalizing segments as statesor industries. Most structural unemployment is due to wage bargaining costs, whichare large but nevertheless contribute little to unemployment fluctuations. Structuralunemployment is as cyclical as overall unemployment and no more persistent, bothin the current and in previous recessions.

The effects of employment uncertainty and wealth shocks on the labor supply and claiming behavior of older American workers

Unemployment rates in developed countries have recently reached levels not seenin a generation, and workers of all ages are facing increasing probabilities of losingtheir jobs and considerable losses in accumulated assets. These events likely increasethe reliance that most older workers will have on public social insurance programs,exactly at a time that public finances are suffering from a large drop in contributions.Our paper explicitly accounts for employment uncertainty and unexpectedwealth shocks, something that has been relatively overlooked in the literature, butthat has grown in importance in recent years. Using administrative and householdlevel data we empirically characterize a life-cycle model of retirement and claimingdecisions in terms of the employment, wage, health, and mortality uncertainty facedby individuals. Our benchmark model explains with great accuracy the strikinglyhigh proportion of individuals who claim benefits exactly at the Early RetirementAge, while still explaining the increased claiming hazard at the Normal RetirementAge. We also discuss some policy experiments and their interplay with employmentuncertainty. Additionally, we analyze the effects of negative wealth shocks on thelabor supply and claiming decisions of older Americans. Our results can explainwhy early claiming has remained very high in the last years even as the early retirementpenalties have increased substantially compared with previous periods, andwhy labor force participation has remained quite high for older workers even in themidst of the worse employment crisis in decades.

Gender gaps in performance: Evidence from young lawyers

This paper documents and studies the gender gap in performance among associatelawyers in the United States. Unlike most high-skilled professions, the legal professionhas widely-used objective methods to measure and reward lawyers' productivity: thenumber of hours billed to clients and the amount of new-client revenue generated. Wefind clear evidence of a gender gap in annual performance with respect to bothmeasures. Male lawyers bill ten-percent more hours and bring in more than double thenew-client revenue. We show that the differential impact across genders in the presenceof young children and the differences in aspirations to become a law-firm partneraccount for a large part of the difference in performance. These performance gaps haveimportant consequences for gender gaps in earnings. While individual and firmcharacteristics explain up to 50 percent of earnings gap, the inclusion of performancemeasures explains most of the remainder.

The role of awareness, information gathering and processing in school choice

This paper studies the determinants of school choice, focusing on the role of information. Weconsider how parents' search efforts and their capacity to process information (i.e., tocorrectly assess schools) affect the quality of the schools they choose for their children. Usinga novel dataset, we are able to identify parents' awareness of schools in their neighborhoodand measure their capacity to rank the quality of the school with respect to the officialrankings. We find that parents education and wealth are important factors in determiningtheir level of school awareness and information gathering. Moreover, these search effortshave important consequences in terms of the quality of school choice.

Predictability of drug expenditures: An application using morbidity data

The growth of pharmaceutical expenditure and its prediction is a major concern for policy makers and health care managers. This paper explores different predictive models to estimate future drug expenses, using demographic and morbidity individual information from an integrated healthcare delivery organization in Catalonia for years 2002 and 2003. The morbidity information consists of codified health encounters grouped through the Clinical Risk Groups (CRGs). We estimate pharmaceutical costs using several model specifications, and CRGs as risk adjusters, providing an alternative way of obtaining high predictive power comparable to other estimations of drug expenditures in the literature. These results have clear implications for the use of risk adjustment and CRGs in setting the premiums for pharmaceutical benefits.

How important is the intensive margin of labor adjustment?

Using new quarterly data for hours worked in OECD countries, Ohanian and Raffo (2011) argue that in many OECD countries, particularly in Europe, hours per worker are quantitatively important as an intensive margin of labor adjustment, possibly because labor market frictions are higher than in the US. I argue that this conclusion is not supported by the data. Using the same data on hours worked, I find evidence that labor market frictions are higher in Europe than in the US, like Ohanian and Raffo, but also that these frictions seem to affect the intensive margin at least as much as the extensive margin of labor adjustment.