Essays in Applied Microeconomics
This dissertation uses reduced form techniques to causally answer questions of direct importance in the fields of health economics, underage alcohol enforcement, and education. The first chapter tests whether Randomized Control Trial evidence showing a procedure to be ineffective substantially changes doctors’ treatment decisions. Leveraging differential timing of publication of clinical trials that show a currently used procedure is ineffective or potentially harmful, I implement an event-study design to estimate how doctors respond to said evidence. I find that the use of the procedures in question only declines modestly by 10% within two years of publication and 30% within four years. Furthermore, focusing on a subset of publications with more definitive findings, I find an effect size of similar magnitude. The slow adoption of new evidence is similar between privately and government insured patients, and there is only weak evidence that non-profit hospitals abandon procedures at a higher rate than medical-school affiliated and for-profit ones. That medical procedures are still commonly performed long after the publication of evidence revealing they are ineffective or harmful suggests the need for greater integration between research and practice.
The second chapter examines the impact of Minor Decoy (MD) citations (a law enforcement strategy targeting liquor license holders rather than underage consumers) in curbing underage alcohol-related crimes. Leveraging spatial variation in when and where citations occur, I use an event-study analysis to study the impact of these citations on arrest rates per 10,000 people for 18-20 year olds, 21-24 year olds and all adults 18 and over. I find suggestive evidence that there is an increase in overall alcohol-related arrests on the day of citation across age groups, mostly driven by liquor law violations. All other arrest categories show no detectable impact of MD citations in curbing underage alcohol-related crime. This suggests that the presence of police in licensed establishments greatly increases likelihood of arrest across all age groups, but does not provide any evidence that the MD programs curb underage alcohol-related arrests. This may be due to the scope of the treatment itself rather than a true null effect.
The final chapter studies the interaction between for-profit college profitability and partisan elections. Identification based on policy announcements is hindered by market anticipation, whereas elections provide well-quantified shocks to the policy environment. For-profit college stocks experienced large and immediate abnormal returns after the 2012 and 2016 presidential elections, but little change after presidential elections or midterm elections before 2016. Private student loan stocks have been sensitive to presidential and congressional results over the last four election cycles. The pattern of estimates is consistent with an important role for recent gainful employment rules, greater data availability, and the expansion of direct federal loans. The effects are largest for colleges with poor debt-to-earnings ratios and high veteran enrollment rates, but abnormal returns are evident across nearly all firms, suggesting that federal policies pose a threat to the profitability and viability of a significant fraction of the industry.