Thesis advisor: Arthur Lewbel / This dissertation consists of three independent essays in applied microeconomics and econometrics. Essay 1 investigates the issue why individuals with health insurance use more health care. One obvious reason is that health care is cheaper for the insured. But additionally, having insurance can encourage unhealthy behavior via moral hazard. The effect of health insurance on medical utilization has been extensively studied; however, previous work has mostly ignored the effect of insurance on behavior and how that in turn affects medical utilization. This essay examines these distinct effects. The increased medical utilization due to reduced prices may help the insured maintain good health, while that due to increased unhealthy behavior does not, so distinguishing these two effects has important policy implications. A two-period dynamic forward-looking model is constructed to derive the structural causal relationships among the decision to buy insurance, health behaviors (drinking, smoking, and exercise), and medical utilization. The model shows how exogenous changes in insurance prices and past behaviors can identify the direct and indirect effects of insurance on medical utilization. An empirical analysis also distinguishes between intensive and extensive margins (e.g., changes in the number of drinkers vs. the amount of alcohol consumed) of the insurance effect, which turns out to be empirically important. Health insurance is found to encourage less healthy behavior, particularly heavy drinking, but this does not yield a short term perceptible increase in doctor or hospital visits. The effects of health insurance are primarily found at the intensive margin, e.g., health insurance may not cause a non-drinker to take up drinking, while it encourages a heavy drinker to drink even more. These results suggest that to counteract behavioral moral hazard, health insurance should be coupled with incentives that target individuals who currently engage in unhealthy behaviors, such as heavy drinkers. Essay 2 examines the effect of repeating kindergarten on the retained children's academic performance. Although most existing research concludes that grade retention generates no benefits for retainees' later academic performance, holding low achieving children back has been a popular practice for decades. Drawing on a recently collected nationally representative data set in the US, this paper estimates the causal effect of kindergarten retention on the retained children's later academic performance. Since children are observed being held back only when they enroll in schools that permit retention, this paper jointly models 1) the decision of entering a school allowing for kindergarten retention, 2) the decision of undergoing a retention treatment in kindergarten, and 3) children's academic performance in higher grades. The retention treatment is modeled as a binary choice with sample selection. The outcome equations are linear regressions including the kindergarten retention dummy as an endogenous regressor with a correlated random coefficient. A control function estimator is developed for estimating the resulting double-hurdle treatment model, which allows for unobserved heterogeneity in the retention effect. As a comparison, a nonparametric bias-corrected nearest neighbor matching estimator is also implemented. Holding children back in kindergarten is found to have positive but diminishing effects on their academic performance up to the third grade. Essay 3 proves the semiparametric identification of a binary choice model having an endogenous regressor without relying on outside instruments. A simple estimator and a test for endogeneity are provided based on this identification. These results are applied to analyze working age male's migration within the US, where labor income is potentially endogenous. Identification relies on the fact that the migration probability among workers is close to linear in age while labor income is nonlinear in age(when both are nonparametrically estimated). Using data from the PSID, this study finds that labor income is endogenous and that ignoring this endogeneity leads to downward bias in the estimated effect of labor income on the migration probability. / Thesis (PhD) — Boston College, 2009. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

No description available.