Three Essays on the Formation and Impact of Economic Policy

Introduction In my thesis I argue that economic policy is all about economics and politics. Consequently, analysing and understanding economic policy ideally has at least two parts. The economics part, which is centered around the expected impact of a specific policy on the real economy both in terms of efficiency and equity. The insights of this part point into which direction the fine-tuning of economic policies should go. However, fine-tuning of economic policies will be most likely subject to political constraints. That is why, in the politics part, a much better understanding can be gained by taking into account how the incentives of politicians and special interest groups as well as the role played by different institutional features affect the formation of economic policies. The first part and chapter of my thesis concentrates on the efficiency-related impact of economic policies: how does corporate income taxation in general, and corporate income tax progressivity in specific, affect the creation of new firms? Reduced progressivity and flat-rate taxes are in vogue. By 2009, 22 countries are operating flat-rate income tax systems, as do 7 US states and 14 Swiss cantons (for corporate income only). Tax reform proposals in the spirit of the "flat tax" model typically aim to reduce three parameters: the average tax burden, the progressivity of the tax schedule, and the complexity of the tax code. In joint work, Marius Brülhart and I explore the implications of changes in these three parameters on entrepreneurial activity, measured by counts of firm births in a panel of Swiss municipalities. Our results show that lower average tax rates and reduced complexity of the tax code promote firm births. Controlling for these effects, reduced progressivity inhibits firm births. Our reading of these results is that tax progressivity has an insurance effect that facilitates entrepreneurial risk taking. The positive effects of lower tax levels and reduced complexity are estimated to be significantly stronger than the negative effect of reduced progressivity. To the extent that firm births reflect desirable entrepreneurial dynamism, it is not the flattening of tax schedules that is key to successful tax reforms, but the lowering of average tax burdens and the simplification of tax codes. Flatness per se is of secondary importance and even appears to be detrimental to firm births. The second part of my thesis, which corresponds to the second and third chapter, concentrates on how economic policies are formed. By the nature of the analysis, these two chapters draw on a broader literature than the first chapter. Both economists and political scientists have done extensive research on how economic policies are formed. Thereby, researchers in both disciplines have recognised the importance of special interest groups trying to influence policy-making through various channels. In general, economists base their analysis on a formal and microeconomically founded approach, while abstracting from institutional details. In contrast, political scientists' frameworks are generally richer in terms of institutional features but lack the theoretical rigour of economists' approaches. I start from the economist's point of view. However, I try to borrow as much as possible from the findings of political science to gain a better understanding of how economic policies are formed in reality. In the second chapter, I take a theoretical approach and focus on the institutional policy framework to explore how interactions between different political institutions affect the outcome of trade policy in presence of special interest groups' lobbying. Standard political economy theory treats the government as a single institutional actor which sets tariffs by trading off social welfare against contributions from special interest groups seeking industry-specific protection from imports. However, these models lack important (institutional) features of reality. That is why, in my model, I split up the government into a legislative and executive branch which can both be lobbied by special interest groups. Furthermore, the legislative has the option to delegate its trade policy authority to the executive. I allow the executive to compensate the legislative in exchange for delegation. Despite ample anecdotal evidence, bargaining over delegation of trade policy authority has not yet been formally modelled in the literature. I show that delegation has an impact on policy formation in that it leads to lower equilibrium tariffs compared to a standard model without delegation. I also show that delegation will only take place if the lobby is not strong enough to prevent it. Furthermore, the option to delegate increases the bargaining power of the legislative at the expense of the lobbies. Therefore, the findings of this model can shed a light on why the U.S. Congress often practices delegation to the executive. In the final chapter of my thesis, my coauthor, Antonio Fidalgo, and I take a narrower approach and focus on the individual politician level of policy-making to explore how connections to private firms and networks within parliament affect individual politicians' decision-making. Theories in the spirit of the model of the second chapter show how campaign contributions from lobbies to politicians can influence economic policies. There exists an abundant empirical literature that analyses ties between firms and politicians based on campaign contributions. However, the evidence on the impact of campaign contributions is mixed, at best. In our paper, we analyse an alternative channel of influence in the shape of personal connections between politicians and firms through board membership. We identify a direct effect of board membership on individual politicians' voting behaviour and an indirect leverage effect when politicians with board connections influence non-connected peers. We assess the importance of these two effects using a vote in the Swiss parliament on a government bailout of the national airline, Swissair, in 2001, which serves as a natural experiment. We find that both the direct effect of connections to firms and the indirect leverage effect had a strong and positive impact on the probability that a politician supported the government bailout.

Length of hospital stay and postdischarge mortality in patients with pulmonary embolism: a statewide perspective

BACKGROUND: The optimal length of stay (LOS) for patients with pulmonary embolism (PE) is unknown. Although reducing LOS is likely to save costs, the effects on patient safety are unclear. We sought to identify patient and hospital factors associated with LOS and assess whether LOS was associated with postdischarge mortality. METHODS: We evaluated patients discharged with a primary diagnosis of PE from 186 acute care hospitals in Pennsylvania (January 2000 through November 2002). We used discrete survival models to examine the association between (1) patient and hospital factors and the time to discharge and (2) LOS and postdischarge mortality within 30 days of presentation, adjusting for patient and hospital factors. RESULTS: Among 15 531 patient discharges with PE, the median LOS was 6 days, and postdischarge mortality rate was 3.3%. In multivariate analysis, patients from Philadelphia were less likely to be discharged on a given day (odds ratio [OR], 0.82; 95% confidence interval [CI], 0.73-0.93), as were black patients (OR, 0.88; 95% CI, 0.82-0.94).The odds of discharge decreased notably with greater patient severity of illness and in patients without private health insurance. Adjusted postdischarge mortality was significantly higher for patients with an LOS of 4 days or less (OR, 1.55; 95% CI, 1.21-2.00) relative to those with an LOS of 5 to 6 days. CONCLUSIONS: Several hospital and patient factors were independently associated with LOS. Patients with a very short LOS had greater postdischarge mortality relative to patients with a typical LOS, suggesting that physicians may inappropriately select patients with PE for early discharge who are at increased risk of complications

Inventory and description of disease management programs in Switzerland

Background: Disease management, a system of coordinated health care interventions for populations with chronic diseases in which patient self-care is a key aspect, has been shown to be effective for several conditions. Little is known on the supply of disease management programs in Switzerland. Objectives: To systematically search, record and evaluate data on existing disease management programs in Switzerland. Methods: Programs met our operational definition of disease management if their interventions targeted a chronic disease, included a multidisciplinary team and lasted at least 6 months. To find existing programs, we searched Swiss official websites, Swiss web-pages using Google, medical electronic database (Medline), and checked references from selected documents. We also contacted personally known individuals, those identified as possibly working in the field, individuals working in major Swiss health insurance companies and people recommended by previously contacted persons (snow ball strategy). We developed an extraction grid and collected information pertaining to the following 8 domains: patient population, intervention recipient, intervention content, delivery personnel, method of communication, intensity and complexity, environment and clinical outcomes (measures?). Results: We identified 8 programs fulfilling our operational definition of disease management. Programs targeted patients with diabetes, hypertension, heart failure, obesity, alcohol dependence, psychiatric disorders or breast cancer, and were mainly directed towards patients. The interventions were multifaceted and included education in almost all cases. Half of the programs included regularly scheduled follow-up, by phone in 3 instances. Healthcare professionals involved were physicians, nurses, case managers, social workers, psychologists and dietitians. None fulfilled the 6 criteria established by the Disease Management Association of America. Conclusions: Our study shows that disease management programs, in a country with universal health insurance coverage and little incentive to develop new healthcare strategies, are scarce, although we may have missed existing programs. Nonetheless, those already implemented are very interesting and rather comprehensive. Appropriate evaluation of these programs should be performed in order to build upon them and try to design a generic disease management framework suited to the Swiss healthcare system.

Weekend versus weekday admission and mortality after acute pulmonary embolism.

BACKGROUND: Optimal management of acute pulmonary embolism (PE) requires medical expertise, diagnostic testing, and therapies that may not be available consistently throughout the entire week. We sought to assess whether associations exist between weekday or weekend admission and mortality and length of hospital stay for patients hospitalized with PE. METHODS AND RESULTS: We evaluated patients discharged with a primary diagnosis of PE from 186 acute care hospitals in Pennsylvania (January 2000 to November 2002). We used random-effect logistic models to study the association between weekend admission and 30-day mortality and used discrete survival models to study the association between weekend admission and time to hospital discharge, adjusting for hospital (region, size, and teaching status) and patient factors (race, insurance, severity of illness, and use of thrombolytic therapy). Among 15 531 patient discharges with PE, 3286 patients (21.2%) had been admitted on a weekend. Patients admitted on weekends had a higher unadjusted 30-day mortality rate (11.1% versus 8.8%) than patients admitted on weekdays, with no difference in length of stay. Patients admitted on weekends had significantly greater adjusted odds of dying (odds ratio 1.17, 95% confidence interval 1.03 to 1.34) than patients admitted on weekdays. The higher mortality among patients hospitalized on weekends was driven by the increased mortality rate among the most severely ill patients. CONCLUSIONS: Patients with PE who are admitted on weekends have a significantly higher short-term mortality than patients admitted on weekdays. Quality-improvement efforts should aim to ensure a consistent approach to the management of PE 7 days a week.

Nanoparticle usage and protection measures in the manufacturing industry : a representative survey

Addressing the risks of nanoparticles requires knowledge about release into the environment and occupational exposure. However, such information currently is not systematically collected; therefore, this risk assessment lacks quantitative data. The goal was to evaluate the current level of nanoparticle usage in Swiss industry as well as health, safety, and environmental measures, and the number of potentially exposed workers. A representative, stratified mail survey was conducted among 1626 clients of the Swiss National Accident Insurance Fund (SUVA), which insures 80,000 manufacturing firms, representing 84% of all Swiss manufacturing companies (947 companies answered the survey for a 58.3% response rate). The extrapolation to all Swiss manufacturing companies results in 1309 workers (95% confidence interval [CI]: 1073 to 1545) potentially exposed to nanoparticles in 586 companies (95% CI: 145 to 1027). This corresponds to 0.08% of workers (95% CI: 0.06% to 0.09%) and to 0.6% of companies (95% CI: 0.2% to 1.1%). The industrial chemistry sector showed the highest percentage of companies using nanoparticles (21.2%). Other important sectors also reported nanoparticles. Personal protection equipment was the predominant protection strategy. Only a few applied specific environmental protection measures. This is the first nationwide representative study on nanoparticle use in the manufacturing sector. The information gained can be used for quantitative risk assessment. It can also help policymakers design strategies to support companies developing a safer use of nanomaterial. Notingthe current low use of nanoparticles, there is still time to proactively introduce protective methods. If the predicted "nano-revolution" comes true, now is the time to take action. [Supplementary materials are available for this article. Go to the publisher's online edition of Journal of occupational and Environmental Hygiene for the following free supplemental resource: a pdf file containing a detailed description of the approach to statistical analyses, English translation of the questionnaire, additional information for Figure 1, and additional information for the SUVA-code.] [Authors]

Inventory and perspectives of chronic disease management programs in Switzerland: an exploratory survey.

OBJECTIVE: To describe chronic disease management programs active in Switzerland in 2007, using an exploratory survey. METHODS: We searched the internet (Swiss official websites and Swiss web-pages, using Google), a medical electronic database (Medline), reference lists of pertinent articles, and contacted key informants. Programs met our operational definition of chronic disease management if their interventions targeted a chronic disease, included a multidisciplinary team (>/=2 healthcare professionals), lasted at least six months, and had already been implemented and were active in December 2007. We developed an extraction grid and collected data pertaining to eight domains (patient population, intervention recipient, intervention content, delivery personnel, method of communication, intensity and complexity, environment, clinical outcomes). RESULTS: We identified seven programs fulfilling our operational definition of chronic disease management. Programs targeted patients with diabetes, hypertension, heart failure, obesity, psychosis and breast cancer. Interventions were multifaceted; all included education and half considered planned follow-ups. The recipients of the interventions were patients, and healthcare professionals involved were physicians, nurses, social workers, psychologists and case managers of various backgrounds. CONCLUSIONS: In Switzerland, a country with universal healthcare insurance coverage and little incentive to develop new healthcare strategies, chronic disease management programs are scarce. For future developments, appropriate evaluations of existing programs, involvement of all healthcare stakeholders, strong leadership and political will are, at least, desirable.

Topics in public finance: social security and taxation

Summary The field of public finance focuses on the spending and taxing activities of governments and their influence on the allocation of resources and distribution of income. This work covers in three parts different topics related to public finance which are currently widely discussed in media and politics. The first two parts deal with issues on social security, which is in general one of the biggest spending shares of governments. The third part looks at the main income source of governments by analyzing the perceived value of tax competition. Part one deals with the current problem of increased early retirement by focusing on Switzerland as a special case. Early retirement is predominantly considered to be the result of incentives set by social security and the tax system. But the Swiss example demonstrates that the incidence of early retirement has dramatically increased even in the absence of institutional changes. We argue that the wealth effect also plays an important role in the retirement decision for middle and high income earners. An actuarially fair, but mandatory funded system with a relatively high replacement rate may thus contribute to a low labor market participation rate of elderly workers. We provide evidence using a unique dataset on individual retirement decisions in Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier men, and to a smaller extent women, tend to leave the workforce. The fact that early retirement has become much more prevalent in the last 15 years is a further indicator of the importance of a wealth effect, as the maturing of the Swiss mandatory funded pension system over that period has led to an increase in the effective replacement rates for middle and high income earners. Part two covers the theoretical side of social security. Theories analyzing optimal social security benefits provide important qualitative results, by mainly using one general type of an economy. Economies are however very diverse concerning numerous aspects, one of the most important being the wealth level. This can lead to significant quantitative benefit differences that imply differences in replacement rates and levels of labor supply. We focus on several aspects related to this fact. In a within cohort social security model, we introduce disability insurance with an imperfect screening mechanism. We then vary the wealth level of the model economy and analyze how the optimal social security benefit structure or equivalently, the optimal replacement rates, changes depending on the wealth level of the economy, and if the introduction of disability insurance into a social security system is preferable for all economies. Second, the screening mechanism of disability insurance and the threshold level at which people are defined as disabled can differ. For economies with different wealth levels, we determine for different thresholds the screening level that maximizes social welfare. Finally, part three turns to the income of governments, by adding an element to the controversy on tax competition versus tax harmonization.2 Inter-jurisdictional tax competition can generate at least two potential benefits or costs: On a public level, tax competition may result in a lower or higher efficiency in the production of public services. But there is also a more private benefit in the form of an option for individuals to move to a community with a lower tax rate in the future. To explore the value citizens attach to tax competition we analyze a unique popular vote for a complete tax harmonization between communities in the third largest Swiss canton, Vaud. Although a majority of voters would have seemingly benefited from replacing the current tax rate by a revenue-neutral average tax rate, the proposal was rejected by a large margin. Our estimates suggest that the estimated combined perceived benefit from tax competition is in the range of 10%.

Use of variability in national and regional data to estimate the prevalence of lymphangioleiomyomatosis.

Background: Understanding the true prevalence of lymphangioleiomyomatosis (LAM) is important in estimating disease burden and targeting specific interventions. As with all rare diseases, obtaining reliable epidemiological data is difficult and requires innovative approaches.Aim: To determine the prevalence and incidence of LAM using data from patient organizations in seven countries, and to use the extent to which the prevalence of LAM varies regionally and nationally to determine whether prevalence estimates are related to health-care provision.Methods: Numbers of women with LAM were obtained from patient groups and national databases from seven countries (n = 1001). Prevalence was calculated for regions within countries using female population figures from census data. Incidence estimates were calculated for the USA, UK and Switzerland. Regional variation in prevalence and changes in incidence over time were analysed using Poisson regression and linear regression.Results: Prevalence of LAM in the seven countries ranged from 3.4 to 7.8/million women with significant variation, both between countries and between states in the USA. This variation did not relate to the number of pulmonary specialists in the region nor the percentage of population with health insurance, but suggests a large number of patients remain undiagnosed. The incidence of LAM from 2004 to 2008 ranged from 0.23 to 0.31/million women/per year in the USA, UK and Switzerland.Conclusions: Using this method, we have found that the prevalence of LAM is higher than that previously recorded and that many patients with LAM are undiagnosed.

Adverse selection, moral hazard, and outlier payment policy

In this article, we analyze the rationale for introducing outlier payments into a prospective payment system for hospitals under adverse selection and moral hazard. The payer has only two instruments: a fixed price for patients whose treatment cost is below a threshold and a cost-sharing rule for outlier patients. We show that a fixed-price policy is optimal when the hospital is sufficiently benevolent. When the hospital is weakly benevolent, a mixed policy solving a trade-off between rent extraction, efficiency, and dumping deterrence must be preferred. We show how the optimal combination of fixed price and partially cost-based payment depends on the degree of benevolence of the hospital, the social cost of public funds, and the distribution of patients severity. [Authors]

Cross-coding from the Swiss Disability Insurance listing to the ICIDH.

It has been suggested that converting, via a process of cross-coding, the listing used by the Swiss Disability Insurance (SDI) for their statistics into codes of the International Classification of Impairments, Disabilities, and Handicaps (ICIDH) would improve the quality and international comparability of disability statistics for Switzerland. Using two different methods we tested the feasibility of this cross-coding on a consecutive sample of 204 insured persons, examined at one of the medical observation centres of the SDI. Cross-coding is impossible, for all practical purposes, in a proportion varying between 30% and 100%, depending on the method of cross-coding, the level of disablement and the required quality of the resulting codes. Failure is due to lack of validity of the SDI codes: diseases are poorly described, consequences of diseases (disability and handicap, including loss of earning capacity), insufficiently described or not at all. Assessment of disability and handicap would provide necessary information for the SDI. It is concluded that the SDI should promote the use of the ICIDH in Switzerland, especially among medical practitioners whose assessment of work capacity is the key element in the decision to award benefits or propose rehabilitation.

Relève en médecine interne générale: enjeux et perspectives [Perspectives and challenges to guarantee training and renewal in general internal medicine]

Training new doctors in general internal medicine represents a challenge. This requires to define future needs, which result from interest that are not necessarily convergent between patients, doctors, insurers and politicians. Problems related to medical demography in Switzerland, with the ageing of the population, the increase in health care costs and the place of Switzerland within the European Community require the implementation of specific objectives to train new physicians in general internal medicine. The success of these opportunities depends on social factors, political choices and choices from physician's association. In this article we will approach these challenges by formulating some proposals--nonexhaustive--in order to guarantee sufficient renewal in general internal medicine.

Lost in translation : euro-compatibility, legal security, and the autonomous implementation of EU law in Switzerland

This article presents the legislative and judicial practice relating to the "autonomous implementation" of EU law in Switzerland. Given that "euro-compatibility" is the central consideration behind this legislative policy, one would expect Swiss authorities to have devised legislative and hermeneutical techniques guaranteeing high fidelity to EU "mother law". That is not the case, however, and as this article shows much is lost in the translation from EU to Swiss Law