Essays in Macroeconomics and Labor Economics

TitleEssays in Macroeconomics and Labor Economics
Publication TypeThesis
Year of Publication2019
AuthorsTan, F
Academic DepartmentEconomics
Number of Pages119
UniversityUniversity of Wisconsin-Madison
Thesis Typephd
ISBN Number9781392287149
Keywords0501:Economics, 0510:Labor economics, Economics, Information technology, Labor economics, Life-cycle, Long-term Care, Medicaid, Medicare, Occupational employment, Social Sciences

The first chapter studies the interaction between family insurance and social insurance. In particular, this paper assesses the value of Medicaid for recent retirees in insuring against long-term care risks while taking into account child-to-parent transfers. Parent retirees receive substantial transfers in the forms of informal care and financial transfers from children. To understand the role of upward intergenerational insurance for old-age health risks, I develop a dynamic model for parent-child pairs and childless retirees. A vital feature of the model is that a parent and her child interact strategically to make decisions about transfers in a non-cooperative game. I estimate and calibrate the model to match the Health and Retirement Study (HRS) data. Using the calibrated model, I calculate the insurance values of Medicaid relative to its cost for retirees and child households. Compensating variation calculations suggest that childless retirees value every dollar of Medicaid insurance at $2.20, which is twice the value for parent retirees ($1.10). Furthermore, I find that middle-income parent retirees value Medicaid insurance less than poor and wealthy parent retirees. An additional result of the paper is that child households also value Medicaid. This decomposition provides a new consideration for the efficient design of Medicaid benefits, particularly in light of a growing population aging without children. The second chapter studies the role of medical expenditure risks in elderly consumption choices. Old-age medical expenditure risks have been documented to have significant impacts on elderly savings. However, little is known about the consumption effects of elderly medical expenditure risks. In this study, we examine the effect of medical expenditure risk on elderly household consumption behaviors. We identify the causal effect by exploiting the exogenous reduction in prescription drug spending risk as a result of the introduction of Medicare Part D in the U.S. in 2006. Using the Health and Retirement Study (HRS) data during 2004–2010, we find that declining medical expenditure risks had little impact on total consumption, regardless of nondurable or durable consumption. The third chapter explores the reasons why the growth rate of non-routine cognitive occupations employment has significantly declined during 2000–2014, compared to 1985–2000. I propose and test the hypothesis that tasks related to information gathering and processing have been substituted by recent information technology after 2000. For that, I develop a model of production process. A novel feature of the model is that outputs are produced using a set of tasks, which combine occupation-specific labor and capital inputs. Recent information technological change is modeled as the declines in the occupation-specific cost of capital. I estimate the conditional labor and product demand using U.S. data. Results of the estimation show that the cost of capital, which is used with occupations related to information gathering and processing in production, has declined faster after 2000. My work contributes to the job polarization literature by documenting and exploring the new dynamics of technological change.


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