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  5. The Social Determinants of Choice Quality, Health and Human Capital
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The Social Determinants of Choice Quality, Health and Human Capital

Paper Session

Sunday, Jan. 3, 2021 12:15 PM - 2:15 PM (EST)

Hosted By: Econometric Society
  • Chair: Benjamin Handel, University of California-Berkeley

The Social Determinants of Choice Quality: Evidence from Health Insurance in the Netherlands

Benjamin Handel
,
University of California-Berkeley

Abstract

There are a range of industries and contexts where regulators directly impact the product choices that consumers have available. If consumers make choice errors, as much prior work documents, then market designers will generally want to weigh the improved match benefits of additional choices with the potential negative consequences of greater consumer misallocation. We study these issues in the Netherlands health insurance market, where the regulator specifies what deductible levels private insurers can offer consumers. Our analysis studies all consumers in the Netherlands using rich administrative data on health insurance choices, health utilization, education, income, wealth, and peers. We document stark differences in choice quality across these domains finding that (i) higher education levels (ii) more analytic degrees (iii) more analytic professions (iv) higher income and (v) higher wealth are all associated with better decisions, conditional on health risk and myriad other socio-demographic factors. We show that peer effects, within families and within firms, have meaningful impacts on consumer choice quality. We leverage these results to study the normative implications of several counterfactual scenarios including (i) optimal allocation of consumers to deductibles (ii) a high deductible mandate and (iii) a low deductible mandate. We assess the consumer surplus and equity implications of these policies and find that, while consumers leave most of the surplus from potential deductible matches on the table, the mandates we consider reduce consumer welfare. We show that the equity implications of these policies depend critically on (i) choice quality by socio-demographic group conditional on health risk and (ii) the correlation between health risk and socio-demographic characteristics.

Creating Moves to Opportunity: Experimental Evidence on Barriers to Neighborhood Choice

Raj Chetty
,
Harvard University
Nathaniel Hendren
,
Harvard University and NBER

Abstract

Low-income families in the United States tend to live in neighborhoods that offer limited opportunities for upward income mobility. One potential explanation for this pattern is that families prefer such neighborhoods for other reasons, such as affordability or proximity to family and jobs. An alternative explanation is that they do not move to high-opportunity areas because of barriers that prevent them from making such moves. We test between these two explanations using a randomized controlled trial with housing voucher recipients in Seattle and King County. We provided services to reduce barriers to moving to high-upward-mobility neighborhoods: customized search assistance, landlord engagement, and short-term financial assistance. Unlike many previous housing mobility programs, families using vouchers were not required to move to a high-opportunity neighborhood to receive a voucher. The intervention increased the fraction of families who moved to high-upward-mobility areas from 15% in the control group to 53% in the treatment group. Families induced to move to higher opportunity areas by the treatment do not make sacrifices on other aspects of neighborhood quality, tend to stay in their new neighborhoods when their leases come up for renewal, and report higher levels of neighborhood satisfaction after moving. These findings imply that most low-income families do not have a strong preference to stay in low-opportunity areas; instead, barriers in the housing search process are a central driver of residential segregation by income. Interviews with families reveal that the capacity to address each family's needs in a specific manner from emotional support to brokering with landlords to customized financial assistance was critical to the program's success. Using quasi-experimental analyses and comparisons to other studies, we show that more standardized policies increasing voucher payment standards in high-opportunity areas or informational interventions have much smaller impacts. We conclude that redesigning affordable housing policies to provide customized assistance in housing search could reduce residential segregation and increase upward mobility substantially.

Place-Based Drivers of Mortality: Evidence from Migration

Amy Finkelstein
,
Massachusetts Institute of Technology
Matthew Gentzkow
,
Stanford University
Heidi Williams
,
Stanford University

Abstract

We estimate the effect of current location on elderly mortality by analyzing outcomes of movers in the Medicare population. We control for movers’ origin locations as well as a rich vector of pre-move health measures. We also develop a novel strategy to adjust for remaining unobservables, based on the assumption that the relative importance of observables and unobservables correlated with movers’ destinations is the same as the relative importance of those correlated with movers’ origins. We estimate substantial effects of current location. Moving from a 10th to a 90th percentile location would increase life expectancy at age 65 by 1.1 years, and equalizing location effects would reduce cross-sectional variation in life expectancy by 15 percent. Places with favorable life expectancy effects tend to have higher quality and quantity of health care, less extreme climates, lower crime rates, and higher socioeconomic status.
Discussant(s)
Rebecca Diamond
,
Stanford University
Anna Aizer
,
Brown University
Jonathan Skinner
,
Dartmouth College
JEL Classifications
  • I1 - Health