Linkage: something for everyone

Two papers from the latest AER. On the left: 1996 US welfare reform seriously damaged the income of the disabled young people that it affected.

I estimate the effects of removing low-income youth with disabilities from Supple- mental Security Income (SSI) on the level and variance of their earnings and income in adulthood. Using a regression discontinuity design based on a 1996 policy change, I find that removed SSI youth earn on average $4,000 annually, an increase of just $2,600 relative to those who remain on SSI, and the volatility of their income quadru- ples. Back-of-the-envelope calculations suggest that up to one-quarter of the value of SSI to recipients comes from its income stabilization effects and the other three-quarters from its income supplementation effects.

On the right: choice-based reforms made NHS hospitals more effective.

The impacts of choice in public services are controversial. We exploit a reform in the English National Health Service to assess the impact of relaxing constraints on patient choice. We estimate a demand model that explicitly captures the referral constraints imposed on patients to evaluate whether removing constraints on choice increased the demand elasticity faced by hospitals. Using data for an important surgical procedure we find that patients became more responsive to clinical quality. The increased demand responsiveness led to a modest reduction in mortality by re-allocating patients and a substantial increase in patient welfare. The elasticity of demand faced by hospitals increased substantially post-reform, giving hospitals stronger incentives to improve their quality of care. Finally, we find evidence that hospitals responded to the enhanced incentives by improving quality. The results suggests greater choice can enhance quality.

Papers are ungated working paper versions.