Abstracts of Selected Recent NBER Working Papers

WP 21600
Emily Oster
Diabetes and Diet: Behavioral Response and the Value of Health

Individuals with obesity often appear reluctant to undertake dietary changes. Evaluating the reasons for this reluctance, as well as appropriate policy responses, is hampered by a lack of data on behavioral response to dietary advice. I use household scanner data to estimate food purchase response to a diagnosis of diabetes, a common complication of obesity. I infer diabetes diagnosis within the scanner data from purchases of glucose testing products. Households engage in statistically significant but small calorie reductions following diagnosis. The changes are sufficient to lose 4 to 8 pounds in the first year, but are only about 10% of what would be suggested by a doctor. The scanner data allows detailed analysis of changes by food type. In the first month after diagnosis, healthy foods increase and unhealthy foods decrease. However, only the decreases in unhealthy food persist. Changes are most pronounced on large, unhealthy, food categories. Those individuals whose pre-diagnosis diet is concentrated in one or a few foods groups show bigger subsequent calorie reductions, with these reductions primarily occuring in these largest food groups. I suggest the facts may be consistent with a psychological framework in which rule-based behavior change is more successful. I compare the results to a policy of taxes or subsidies.

WP 21669
David Neumark, Ian Burn, Patrick Button
Is it Harder for Older Workers to Find Jobs? New and Improved Evidence from a Field Experiment

We design and implement a large-scale field experiment—a resume correspondence study—to address a number of potential limitations of existing field experiments testing for age discrimination, which may bias their results. One limitation that may bias these studies towards finding discrimination is the practice of giving older and younger applicants similar experience in the job to which they are applying, to make them "otherwise comparable." The second limitation arises because greater unobserved differences in human capital investment of older applicants may bias existing field experiments against finding age discrimination. We also study ages closer to retirement than in past studies, and use a richer set of job profiles for older workers to test for differences associated with transitions to less demanding jobs ("bridge jobs") at older ages. Based on evidence from over 40,000 job applications, we find robust evidence of age discrimination in hiring against older women. But we find that there is considerably less evidence of age discrimination against men after correcting for the potential biases this study addresses.

WP 21818
Erzo F. P. Luttmer, Andrew Samwick
The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security

Policy uncertainty can reduce individual welfare when individuals have limited opportunities to mitigate or insure against consumption fluctuations induced by the policy uncertainty. For this reason, policy uncertainty surrounding future Social Security benefits may have important welfare costs. We field an original survey to measure the degree of policy uncertainty in Social Security and to estimate the impact of this uncertainty on individual welfare. On average, our survey respondents expect to receive only about 60 percent of the benefits they are supposed to get under current law. We document the wide variation around the expectation for most respondents and the heterogeneity in the perceived distributions of future benefits across respondents. This uncertainty has real costs. Our central estimates show that on average individuals would be willing to forego around 6 percent of the benefits they are supposed to get under current law to remove the policy uncertainty associated with their future benefits. This translates to a risk premium from policy uncertainty equal to 10 percent of expected benefits.

WP 21851
Alexander Gelber, Timothy Moore, Alexander Strand
The Effect of Disability Insurance Payments on Beneficiaries' Earnings

A crucial issue in studying social insurance programs is whether they affect work decisions through income or substitution effects. We examine this in the context of U.S. Social Security Disability Insurance (DI), one of the largest social insurance programs in the U.S. The formula linking DI payments to past earnings has discontinuous changes in the marginal replacement rate that allow us to use a regression kink design to estimate the effect of payment size on earnings. Using Social Security Administration data on all new DI beneficiaries from 2001 to 2007, we document a robust income effect of DI payments on earnings. Our preferred estimate is that an increase in DI payments of one dollar causes an average decrease in beneficiaries' earnings of twenty cents. This suggests that the income effect represents an important factor in driving DI-induced reductions in earnings.

WP 21854
Donald Keim, Olivia Mitchell
Simplifying Choices in Defined Contribution Retirement Plan Design

In view of the growth and popularity of defined contribution pensions, along with the government's growing attention to retirement plan costs and investment choices provided, it is important to understand how people select their retirement plan investments. This paper shows how employees in a large firm altered their fund allocations when the employer streamlined its pension fund menu and deleted nearly half of the offered funds. Using administrative data, we examine the changes in plan participant investment choices that resulted from the streamlining and how these changes might affect participants' eventual retirement wellbeing. We show that streamlined participants' new allocations exhibited significantly lower within-fund turnover rates and expense ratios, and we estimate this could lead to aggregate savings for these participants over a 20-year period of $20.2M, or in excess of $9,400 per participant. Moreover, after the reform, streamlined participants' portfolios held significantly less equity and exhibited significantly lower risks by way of reduced exposures to most systematic risk factors, compared to their non-streamlined counterparts.

WP 21855
David C. Chan, Jr.
Uncertainty, Tacit Knowledge, and Practice Variation: Evidence from Physicians in Training

Substantial practice variation across physicians for seemingly similar patients is an unresolved puzzle of great interest to economists and policy makers. This paper studies physicians in training to explore the behavioral foundations of practice variation. A discontinuity in the formation of teams reveals a large role for relative experience in the size of practice variation. Among the same physician trainees, convergence occurs in services driven by specialists, where there is arguably more explicit knowledge, but not on the general medicine service. Similarly, rich physician characteristics correlated with preferences and ability explain little if any variation.

WP 21894
Victor Lavy, Analia Schlosser, Adi Shany
Liquidity in Retirement Savings Systems: An International Comparison

Out of Africa: Human Capital Consequences of In Utero Conditions This paper investigates the effects of environmental conditions during pregnancy on later life outcomes using quasi-experimental variation created by the immigration of Ethiopian Jews to Israel in May 24th 1991. Children in utero prior to immigration faced dramatic differences in medical care technologies, prenatal conditions, and prenatal care at the move from Ethiopia to Israel. One of the major differences was adequacy of micronutrient supplements, particularly iodine, iron and folic acid. We find that children exposed in an earlier stage of the pregnancy to better environmental conditions in utero have two decades later higher educational attainment (lower repetition and dropout rates and higher Baccalaureate rate) and higher education quality (achieve a higher proficiency level in their Baccalaureate diploma). The average treatment effect we estimate is driven mainly by a strong effect on girls. We find however, no effect on birth weight or mortality for girls.

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