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Essays in public and labor economics

  • Author(s): Yang, Hee-Seung
  • et al.
Abstract

This dissertation consists of three empirical papers exploring policy-relevant questions in Public Finance and Labor Economics. In particular, it inquires into social insurance programs, the purpose of which is to protect individuals against adverse events. More generous benefits, however, often lead to unintended behavioral responses even as they provide greater protection. This dissertation focuses on identifying and quantifying the distortionary effects of social insurance, providing an input to optimal design. The first chapter investigates the effect of Social Security dependent benefit provisions on the labor force participation of married women aged 25-54. Many provisions of the Social Security program may distort an individual's work incentive. In particular, the availability of dependent benefits may reduce the net return to work since secondary earners, who are likely to claim benefits based on their spouses' earnings records, pay the full payroll tax without receiving marginal benefits for additional earnings. I rely on differences in Social Security coverage among husbands by state and sector to identify the impact on the labor supply of their wives. The results show that married women tend to reduce their labor supply when dependent benefits are available, suggesting that changes in the Social Security system that strengthen the relationship between earnings and benefits would have a positive effect on the labor supply of married women. The second chapter analyzes how Social Security dependent benefit provisions affect women's divorce behavior. Under the current Social Security system, a divorced woman is eligible to receive dependent benefits based on her ex-spouse's earnings record if her marriage lasted at least 10 years and she remains unmarried after divorce. Using data from the Panel Study of Income Dynamics, I estimate a discrete time duration model of the probability of divorce. The results suggest that married women are likely to delay divorce to preserve the option of receiving dependent benefits if their marriages are near 10 years duration. This effect is stronger for women whose earnings are much lower than their husbands' or whose predicted remarriage probabilities are low, so are those most likely to value the option. The final chapter examines the effect of extended parental coverage on young adults' labor market choices. Young adults aged 19-29 are significantly less likely to have health insurance since most family insurance policies cut off dependents when they turn 19 or finish college. In recent years, several states have expanded eligibility to allow young adults as old as 30 to remain covered under their parents' employer- provided health insurance. For those who qualify for these benefits, the expansion of parental coverage partially reduces the value of being employed by a firm that provides health insurance since adult children can now get health insurance through another channel. We employ quasi- experimental variation in the timing and generosity of states' eligibility rules to identify the effect of the policy change on young adults' labor market choices. Our results suggest that the expansion of parental coverage increases the group coverage rate and reduces labor supply among young adults, particularly in full-time employment

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