Alma Cohen

The Effects of Mandatory Seat Belt Laws on Driving Behavior and Traffic Fatalities

This paper investigates the effects of mandatory seat belt laws on driver behavior and traffic fatalities. Using a unique panel data set on seat belt usage in all U.S. jurisdictions, we analyze how such laws, by influencing seat belt use, affect the incidence of traffic fatalities. Allowing for the endogeneity of seat belt usage, we find that such usage decreases overall traffic fatalities. The magnitude of this effect, however, is significantly smaller than the estimate used by the National Highway Traffic Safety Administration. In addition, we do not find significant support for the compensating-behavior theory, which suggests that seat belt use also has an indirect adverse effect on fatalities by encouraging careless driving. Finally, we identify factors, especially the type of enforcement used, that make seat belt laws more effective in increasing seat belt usage.

THE EFFECT OF AUTOMOBILE INSURANCE AND ACCIDENT LIABILITY LAWS ON TRAFFIC FATALITIES

This paper investigates the incentive effects of automobile insurance, compulsory insurance laws, and no‐fault liability laws on driver behavior and traffic fatalities. We analyze a panel of 50 U.S. states and the District of Columbia for 1970–98, a period in which many states adopted compulsory insurance regulations and/or no‐fault laws. Using an instrumental variables approach, we find evidence that automobile insurance has moral hazard costs, leading to an increase in traffic fatalities. We also find that reductions in accident liability produced by no‐fault liability laws have led to an increase in traffic fatalities (estimated to be on the order of 6 percent). Overall, our results indicate that, whatever other benefits they might produce, increases in the incidence of automobile insurance and moves to no‐fault liability systems have significant negative effects on traffic fatalities.

Validation of a swallowing disturbance questionnaire for detecting dysphagia in patients with Parkinson's disease

Underreporting of swallowing disturbances by Parkinsons disease (PD) patients may lead to delay in diagnosis and treatment, alerting the physician to an existing dysphagia only after the first episode of aspiration pneumonia. We developed and validated a swallowing disturbance questionnaire (SDQ) for PD patients and compared its findings to an objective assessment. Fifty‐seven PD patients (mean age 69 ± 10 years) participated in this study. Each patient was queried about experiencing swallowing disturbances and asked to complete a self‐reported 15‐item “yes/no” questionnaire on swallowing disturbances (24 replied “no”). All study patients underwent a physical/clinical swallowing evaluation by a speech pathologist and an otolaryngologist. The 33 patients who complained of swallowing disturbances also underwent fiberoptic endoscopyic evaluation of swallowing (FEES). According to the ROC test, the “optimal” score (where the sensitivity and specificity curves cross) is 11 (sensitivity 80.5%, specificity 81.3%). Using the SDQ questionnaire substantially reduced Type I errors (specifically, an existing swallowing problem missed by the selected cutoff point). On the basis of the SDQ assessment alone, 12 of the 24 (50%) noncomplaining patients would have been referred to further evaluation that they otherwise would not have undergone. The SDQ emerged as a validated tool to detect early dysphagia in PD patients.

How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment

The well-established negative correlation between staggered boards (SBs) and firm value could be due to SBs leading to lower value or a reflection of low-value firms’ greater propensity to maintain SBs. We analyze the causal question using a natural experiment involving two Delaware court rulings–separated by several weeks and going in opposite directions–that affected the antitakeover force of SBs. We contribute to the long-standing debate on staggered boards by documenting empirical evidence consistent with the market viewing SBs as leading to lower firm value for the affected firms.

Do Financial Incentives Affect Fertility

This paper investigates how fertility responds to changes in the price of a marginal child and in household income. We construct a large, individual-level panel data set of married Israeli women during the period 1999-2005 that contains fertility histories and detailed controls. We exploit variation in Israels child subsidy program to identify changes in the price of a marginal child (using changes in the subsidy for a marginal child) and to instrument for household income (using changes in the subsidy for infra-marginal children). We find a significant and positive price effect on fertility: the mean level of marginal child subsidy produces a 7.8 percent increase in fertility. There is a positive effect within all religious and ethnic subgroups, including the ultra-Orthodox Jewish population, whose social and religious norms discourage family planning. There is also a significant price effect on fertility among women who are close to the end of their lifetime fertility, suggesting that at least part of the price effect is due to a reduction in total fertility. As expected, the child subsidy has no effect in the upper range of the income distribution. Finally, consistent with the predictions of Becker (1960) and Becker and Tomes (1976), we find that the income effect is small in magnitude and is negative at low income levels and positive at high levels.

Judicial Decision Making: A Dynamic Reputation Approach

We seek to contribute to an understanding of how judicial elections affect the incentives and decisions of judges. We develop a theoretical model suggesting that judges who are concerned about their reputation will tend to decide against their prior decisions as they approach elections. That is, judges who imposed a large number of severe sentences in the past and are thus perceived to be strict will tend to impose less severe sentences prior to elections. Conversely, judges who imposed a large number of light sentences in the past and are thus perceived to be lenient will tend to impose more severe sentences prior to elections. Using data from the Pennsylvania Commission on Sentencing, we test, and find evidence consistent with, the predictions of our model.

Affirmative Action and Stereotype Threat

This paper experimentally investigates the effect of gender-based affirmative action (AA) on performance in the lab, focusing on a tournament environment. The tournament is based on GRE math questions commonly used in graduate school admission, and at which women are known to perform worse on average than men. We find heterogeneous effect of AA on female participants: AA lowers the performance of high-ability women and increases the performance of low-ability women. Our results are consistent with two possible mechanisms—one is that AA changes incentives differentially for low- and high-ability women, and the second is that AA triggers stereotype threat. An earlier version of this paper was circulated as “Affirmative Action and Stereotype Threat.�?

The Disadvantages of Aggregate Deductibles

This paper analyzes the choice of deductible in insurance contracts that insure against a risk that, as is common, might materialize more than once during the life of the policy. As was established by Arrow (1963), from the perspective of risk-bearing costs, the optimal contract is one that uses an aggregate deductible that applies to the aggregate losses incurred over the life of the policy. Aggregate deductibles, however, are uncommon in practice. This paper identifies two disadvantages that aggregate deductibles have. Aggregate deductibles are shown to produce higher expected verification costs and moral hazard costs than contracts that apply a per-loss deductible to each loss that occurs. I further show that each of these disadvantages can make an aggregate deductible contact inferior to a contract with per loss deductibles. The results of the analysis can help explain the rare use of aggregate deductibles and, in addition, might explain why umbrella policies that cover all types of losses are rarely used.

Staggered Boards and Shareholder Value: A Reply to Amihud and Stoyanov

In a paper published in the JFE in 2013, we provided evidence that market participants perceive staggered boards to be on average value-reducing. In a recent response paper, Amihud and Stoyanov (2015) “contest” our results. They advocate using alternative methods for estimating risk-adjusted returns and excluding some observations from our sample. Amihud and Stoyanov claim that making such changes renders our results not significant (though retaining their direction) and conclude that staggered boards have no significant effect on firm value. This paper examines and replies to the Amihud-Stoyanov challenge. We question their methodological claims, study the consequences of following their suggestions, and conduct additional robustness tests. Our analysis shows that the evidence is overall consistent with the results and conclusions of our JFE paper.

Termination Risk and Agency Problems: Evidence from the NBA

When organizational structures and contractual arrangements face agents with a significant risk of termination in the short term, such agents may under-invest in projects whose results would be realized only in the long term. We use NBA data to study how risk of termination in the short term affects the decision of coaches. Because letting a rookie play produces long-term benefits on which coaches with a shorter investment horizon might place lower weight, we hypothesize that higher termination risk might lead to lower rookie participation. Consistent with this hypothesis, we find that, during the period of the NBA’s 1999 collective bargaining agreement (CBA) and controlling for the characteristics of rookies and their teams, higher termination risk was associated with lower rookie participation and that this association was driven by important games. We also find that the association does not exist for second-year players and that the identified association disappeared when the 2005 CBA gave team owners stronger incentives to monitor the performance of rookies and preclude their underuse.