Essays on Human Capital, Public Policy, and Decision-Making

Abstract

This dissertation shows that changes in human capital and economic factors lead to some variations in the decisions of individuals regarding welfare participation and fertility. It also provides evidence that public policy influences the way in which organizations behave in the market. The first chapter provides evidence that work in adolescence increases the stock of human and social capital, and develops psychological barriers that reduce the likelihood of participating in a welfare program and the amount of welfare receipt. The second chapter investigates the economic factors behind the recent rise of the one-child family in the United States. The study finds that an increase in the standard deviation of income is associated with a reduction in the probability of having the second child for mothers that are in the second quartile of income distribution. In the third chapter, the study investigates the decision of health care institutions regarding the quality of the service provided, and finds that policies that intended to reduce the cost and help the consumer by restricting the supply of health care facilities have decreased the quality of the service provided.

The first chapter employs welfare participation to investigate the impact of working during adolescence on outcomes later in life. I use National Longitudinal Survey of Youth (NLSY) 1979 data to investigate the impact of the average hours worked from age 14 through 19 on both the welfare payment and the probability of welfare participation in the twenties and thirties of the respondents’ life. I use a variety of different model specifications, including instrumental variables and Heckman selection models, to check the robustness of the results. The study shows that working one extra full-time week per year for an average individual between the ages of 14 to 19 will reduce the probability of receiving welfare in the twenties by 2.6 (10.8%) percentage points and the welfare payment received in the twenties by 6.3% per year. This impact is generated mainly from the hours worked during the ages of 17, 18 and 19.

The second chapter investigates the economic factors behind the recent rise of the one-child family in the United States. Using longitudinal data from the Panel Study of Income Dynamics (PSID) that runs from 1968 to 2013 and a variety of different model specifications with state and year fixed effect, including logistic regression, linear probability, and Cox proportional hazard models, I examine the effect of absolute income volatility on the decision of having an only-child family. The study distinguishes between absolute income volatility and negative changes in income and shows that an increase of $1,000 in the standard deviation of income is associated with a decrease of 26 percentage points in the probability of having a second child for mothers who are in the second quartile of income distribution. Mothers who are in the second and third quartiles of income distribution are more affected by the negative income changes if they experience high income volatility. These mothers are more likely to have a second child in response to negative income changes, most likely attributed to the marginal tax benefit that the second child would bring for mothers in these income categories.

The third and the final chapter investigates the effect of implementing the certificate of need (CON) laws on the quality of nursing homes care. Using a variety of data sources and different model specifications including Instrumental Variable, the study finds that nursing homes in the CON states reduce their costs by lowering the quality of service.