McCauley, JE; (2018) Essays on Applied Public Finance. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

This thesis is made up of three main essays, each utilizing applied micro-econometric techniques to develop a deeper understanding of issues involving healthcare and benefit receipt. The first essay (Chapter 2) documents the medical spending of the US population aged 65 and older. It establishes some important facts, including that the government provides over 65% of the elderly’s medical expenses. Despite this, the expenses that remain after government transfers are even more concentrated among a small group of people. Thus, government health insurance, while valuable, is far from complete. The second essay (Chapter 3) estimates the effect of Disability Insurance benefit receipt on mortality. Those receiving benefits receive large cash transfers, and health insurance, but also face work disincentives. Each of these factors could affect mortality. Identifying the overall mortality effect is difficult, however, because those allowed benefits may be unobservably less healthy than those denied. I exploit the random assignment of judges to disability insurance cases to create instrumental variables that address this selection effect and find considerable heterogeneity in the mortality response. The final essay (Chapter 4) assesses whether the low observed rate of welfare migrants is due to individuals not knowing the quality of welfare programs in their area. I focus on the elderly in England and use a policy introduced in 2002, where the national government gave a publicly-released rating of the quality of each area’s social services (which includes social care). I treat this public release of the ratings as an “information shock” and analyze the distribution of the elderly population across areas before and after the star ratings became public. I use the facts from my empirical analysis to motivate a search model with nested learning, where individuals search for the areas with the best social services and gradually learn about their unobserved quality. Estimates suggest that there is a lot of noise in the learning process, but overall the information release led to increases in utility by affecting migration decisions.

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