Research Roundup: Economics & Policy

Here are some highlights from policy-relevant economic research released over the past week…

Comparison Friction: Experimental Evidence from Medicare Drug Plans
National Bureau of Economic Research // Jeffrey R. Kling, Sendhil Mullainathan, Eldar Shafir, Lee Vermeulen, Marian Wrobel // September 12, 2011

Question: How does access to information influence healthcare choices?

Findings: “In the market for Medicare Part D prescription drug plans… an intervention group received a letter with personalized cost information. That information was readily available for free and widely advertised. However… providing the information rather than having consumers actively access it… had an impact.” Those who received the letter were more likely than those who didn’t to switch plans and they saved an average of $100 year.

Why It Matters: The fact that information is widely available doesn’t mean consumers access it. In cases where the government is ultimately footing the bill, such as healthcare, efforts to ensure consumers have complete information can save money.

Exercise, Physical Activity, and Exertion over the Business Cycle
National Bureau of Economic Research // Gregory J. Colman, Dhaval M. Dave // September 12, 2011

Question: How does unemployment affect individuals’ levels of physical activity?

Findings: “Recreational exercise tends to increase as employment decreases… However, this increase in exercise as well as other activities does not compensate for the decrease in work-related exertion due to job-loss. Thus total physical exertion… declines. These behavioral effects are strongest among low-educated males.”

Why It Matters: Unemployment can impact health, especially among individuals who were employed in physically active jobs and see their level of exercise drop significantly after losing those jobs. This finding is particularly relevant to our current recession, which hit physically demanding industries like manufacturing and construction hardest.

Public Debts: Nuts, Bolts and Worries
Centre for Economic Policy Research (CEPR) & International Center for Monetary and Banking Studies (ICMB) // Barry Eichengreen, Robert Feldman, Jeffrey Liebman, Jürgen von Hagen, Charles Wyplosz // September 16, 2011

Question: What causes advanced democracies (the U.S., Europe, and Japan) to accrue large government debt?

Findings: The key cause is the “common-pool effect”. “Since those who benefit from a given public policy do not bear the full burden of funding it, they tend to ask for more spending (or tax benefits) than they would if they did… [and] let others either in the current generation or future generations pay for those benefits. The result is excessive deficits.”

Why It Matters: The tendency to create deficits is inherent in the structure of democracies, particularly those with diverse populations and large government decision-making structures like the U.S. The report also explores ways to reverse the trend that are tailored to each country’s political institutions.

Housing Busts and Household Mobility: An Update
National Bureau of Economic Research // Fernando Ferreira, Joseph Gyourko, Joseph Tracy // September 12, 2011

Question: How do mortgage equity problems (negative equity, mortgage lock-in, and property tax lock-in) affect household mobility?

Findings: “Our updated estimates corroborate our previous results: negative equity reduces household mobility by 30 percent, and $1,000 of additional mortgage or property tax costs reduces household mobility by 10%-16%.”

Why It Matters: The study finds that if you owe more on your house than it’s worth, you’re less likely to move to a new house. This can lead to problems in the labor market, as it reduces the mobility of labor – in other words, people aren’t able to move to areas with the best available jobs.

School Choice, School Quality and Postsecondary Attainment
National Bureau of Economic Research // David J. Deming, Justine S. Hastings, Thomas J. Kane, Douglas O. Staiger // September 19, 2011

Question: How does a public school choice lottery (in which selected students are eligible to attend a school of their choice) impact long-term educational outcomes?

Findings: “Among applicants with low-quality neighborhood schools, lottery winners are more likely than lottery losers to graduate from high school, attend a four-year college, and earn a bachelor’s degree. They are twice as likely to earn a degree from an elite university.”

Why It Matters: This study supports the basic premise of the “school choice” movement: that allowing students to attend public schools of their choice improves their long-term educational outcomes.

Integration and Task Allocation: Evidence from Patient Care
National Bureau of Economic Research // Guy David, Evan Rowley, Daniel Polsky // September 19, 2011

Question: How does vertical integration of healthcare affect costs and health outcomes?

Findings: “Vertical integration allows hospitals to shift patient recovery tasks downstream to lower cost delivery systems [nursing homes and home health care] by discharging patients earlier and in poorer health… While integration facilitates a shift in the allocation of tasks, health outcomes are no worse when patients receive care from an integrated provider.”

Why It Matters: The integration of healthcare systems allows for lower-cost recovery after hospital visits without reducing quality of care.

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