Nobel economist Angus Deaton on a year of political earthquakes

December 22, 2016

He sees an epidemic of pain and a related flood of opioids into communities over the past decade as being, more than globalisation or economic dislocation, the real cause of rising mortality among middle-aged white Americans.

With Gallup’s help he has been collecting data on how many people report having felt physical pain in the past 24 hours and says the numbers are staggering in the US. What is causing that epidemic — and its links to Trump’s rise — remains unclear, he says. He seems more willing to blame pharmaceutical companies and doctors for overprescribing opioids. A surge in addiction (drug overdoses caused more deaths in the US last year than auto accidents) has, he argues, proved far more fatal than globalisation.

Source: Nobel economist Angus Deaton on a year of political earthquakes


A Very Depressing Paper on the Great Stagnation – Marginal REVOLUTION

December 22, 2016

Since 1950 life expectancy at birth has been growing at a remarkably steady rate of about 1.8 years per decade but that growth has only been bought by ever increasing number of researchers. Here, for example, is cancer mortality as function of the number of publications or clinical trials. Each clinical trial used to be associated with ~8 lives saved per 100,000 people but today a new clinical trial is associated with only ~1 life saved per 100,000.

Source: A Very Depressing Paper on the Great Stagnation – Marginal REVOLUTION


The Labor‐Market Impact of San Francisco’s Employer‐Benefit Mandate by Carrie Colla, William Dow, Arindrajit Dube :: SSRN

December 22, 2016

We evaluate a San Francisco policy requiring employers to provide health benefits or contribute to a public‐option health plan to better understand the incidence of employer mandates through their effects on wages, employment, and prices. We develop an individual case study approach combining border discontinuity in policies and permutation‐type inference using other metropolitan areas. Findings indicate that employment patterns did not change appreciably following the policy, and there is little evidence of significant negative earnings in highly impacted sectors. However, approximately half of the incidence of the mandate in the restaurant sector fell on consumers via surcharges.

Source: The Labor‐Market Impact of San Francisco’s Employer‐Benefit Mandate by Carrie Colla, William Dow, Arindrajit Dube :: SSRN


The Politics of Professionalism: Reappraising Occupational Licensure and Competition Policy by Sandeep Vaheesan, Frank A. Pasquale :: SSRN

December 22, 2016

Elite economists and lawyers have united to criticize occupational licensing. They contend that licensure rules raise consumer prices and restrict labor market entry and job mobility. The Obama Administration’s Council of Economic Advisers and Federal Trade Commission have joined libertarians and conservatives in calling for occupational regulations to be scaled back.

Billed as a bipartisan boost to market competition, this technocratic policy agenda rests on thin empirical foundation. Studies of the wage effects of licensing rarely couple this analysis of its putative “costs” with convincing analysis of the benefits of the professional or vocational education validated via licensure. While some licensing rules may be onerous and excessive, licensing rules are inadequate or underenforced in other labor markets. Furthermore, by limiting labor market entry, occupational licensing rules, like minimum wage and labor laws, can help raise and stabilize working and middle class wages — goals that many center-left critics of occupational licensing claim to support.

While current antitrust law provides an ideological framework for technocratic attacks on licensing, it is fundamentally unsuited for a fair evaluation of labor markets. Contemporary antitrust law’s arcane concept of efficiency reflects neither the legislative objectives animating the antitrust statutes, nor popular understanding of what competition policy should do. Occupational licensing should reflect an expansive conception of the public interest and be the product of democratic decisionmaking — not a technocratic mission to advance an esoteric notion of “efficiency.” Both the Department of Justice and the Federal Trade Commission should make occupational licensing and collective action by workers a much lower advocacy and enforcement priority.

Source: The Politics of Professionalism: Reappraising Occupational Licensure and Competition Policy by Sandeep Vaheesan, Frank A. Pasquale :: SSRN


Regulation of Price Increases by David B. Ridley, Su Zhang :: SSRN

December 22, 2016

U.S. federal and state governments rarely regulate healthcare price levels, but do regulate price changes for pharmaceuticals, hospitals, and health insurance. Previous research showed that limiting price increases can raise launch prices and reduce both profit and social welfare, assuming consumers are myopic. We show that with forward-looking consumers, limiting price increases can have the opposite effect, that is, launch prices fall while profit and social welfare rise. Ironically, inflation regulation can cause inflation to rise, but only because firms are reducing launch prices to make the regulation bind and credibly commit to future prices.

Source: Regulation of Price Increases by David B. Ridley, Su Zhang :: SSRN


Improving the Quality of Choices in Health Insurance Markets by Jason Abaluck, Jonathan Gruber :: SSRN

December 20, 2016

Insurance product choice is a central feature of health insurance markets in the United States, yet there is ongoing concern over whether consumers choose appropriately in such markets – and little evidence on solutions to any choice inconsistencies. This paper addresses these omissions from the literature using novel data and a series of policy interventions across school districts in the state of Oregon. Using data on enrollment and medical claims for school district employees, we first document large choice inconsistencies, with the typical employee foregoing savings of more than $600 in their insurance plan choice. We then consider three types of interventions designed to improve choice quality. We first show that interventions to promote more active choice are unlikely to improve choice quality based on existing patterns of plan switching. We then implement a randomized trial of decision support software to illustrate that it has little impact on plan choices, largely because of consumer avoidance of the recommendations. Finally, we show that restricting the choice set size facing individuals does significantly reduce their foregone saving and total costs. This is not because individuals choose worse with larger choice sets, but rather because larger choice sets feature worse choices on average that are not offset by individual re-optimization.

Source: Improving the Quality of Choices in Health Insurance Markets by Jason Abaluck, Jonathan Gruber :: SSRN


Drug Shortages, Pricing, and Regulatory Activity by Christopher Stomberg :: SSRN

December 20, 2016

This study examines the patterns and causes of shortages in generic non-injectable drugs (e.g., tablets and topicals) in the United States. While shortages for injectable drugs have garnered more attention, shortages of other forms of prescription drugs have also been on the increase. In fact, they follow a strikingly similar trend with a number of important tablet drugs having recently been affected by shortage. This poses important questions about the root causes of these trends since most explanations found in the literature are specific to generic injectable drugs. Using a simple heuristic framework, three contributing factors are explored: regulatory oversight, potential market failures in pricing/reimbursement, and competition. This paper features an empirical examination of the contribution of changes in regulatory oversight to drug shortages. A pooled dynamic regression model using FDA data on inspections and citations reveals a statistically significant relationship between FDA regulatory activity (inspections and citations) and drug shortage rates. This result cuts across both injectable and non-injectable drugs, and could reveal a transition in equilibrium quality that should be transitory in nature, but it should also be interpreted with care given the other factors likely affecting shortage rates.

Source: Drug Shortages, Pricing, and Regulatory Activity by Christopher Stomberg :: SSRN