Essays in Public Finance
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CitationBruich, Gregory Alan. 2015. Essays in Public Finance. Doctoral dissertation, Harvard University, Graduate School of Arts & Sciences.
AbstractMy dissertation consists of three chapters on topics in public finance. Chapter 1 studies optimal disability insurance (DI) in two parts. In the first part, I show that the well-established result that DI reduces labor supply is driven largely by making it feasible for the disabled to stop working, rather than by reducing effective wages. Therefore, DI is very valuable because it operates through a non-distortionary (and welfare enhancing) income effect, rather than a price or substitution effect. In the second part of my paper, I show that externalities and internalities create unique challenges for designing DI systems. I study an institutional setting where 80% of the population receives a payment on the same day each month. I find that the probability of an emergency room visit increases for DI beneficiaries, but not others, when monthly income is received, and this response to payments is present even in the years before they were granted DI benefits. The results imply that optimal policy may involve non-traditional policy tools. Chapter 2 presents evidence on one such alternative policy tool, in-kind transfers, in the context of food stamp benefits in the United States. In November 2013, temporary benefit increases in the American Recovery and Reinvestment Act expired, resulting in lower benefits for all Supplemental Nutrition Assistance Program (SNAP) households. I use scanner data from 400 grocery stores and over 2.5 million SNAP households in Atlanta, Los Angeles, and Columbus, OH to estimate the effect of the benefit cuts on household spending. I find that the impact per household was relatively small, but the aggregate impact was large because 23 million households were affected in November 2013. In contrast, subsequent legislation passed in February 2014 will impact relatively few households, leading to a much smaller aggregate impact. Chapter 3 shows that, in addition to ER visits, consumption of hard alcohol, crime, and traffic accidents all increase nationwide in Denmark when 80% of the population receives income each month. Deaths may also increase. This evidence runs counter to standard theories of how households make consumption decisions and sheds new light on potential explanations.
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