Jonathan S. Feinstein

The Relationship between Socioeconomic Status and Health: A Review of the Literature

Mortality rates in the developed world have fallen sharply during the twentieth century. Individuals of lower socioeconomic status, however, generally have faced higher mortality rates than individuals of higher status. The literature documenting the relationship between socioeconomic status and health is reviewed, including several recent contributions and evidence from other countries. A conceptual framework then draws two distinctions: one contrasting the relative impact of lifestyle habits with the use of health care on health outcomes; and the other seeking to quantify the importance of resources relative to behavioral factors in explaining differential outcomes. The literature to date has been more successful in documenting health inequalities than in explaining why these inequalities persist.

An Econometric Analysis of Income Tax Evasion and its Detection

This article presents an econometric analysis of income tax evasion and its detection based on individual-level data drawn from the Internal Revenue Service 1982 and 1985 Taxpayer Compliance Measurement Programs. I specify a model consisting of two equations: the first measures the extent of evasion; the second, the fraction of evasion detected. The empirical analysis explores the effects of income, the marginal tax rate, and various socioeconomic characteristics on filer evasion behavior, and it assesses the variability in detection rates among IRS examiners. Finally, I use the empirical estimates to construct new estimates of the income tax gap; the new estimates are very close to the previous IRS estimates.

Honesty and Evasion in the Tax Compliance Game

Conventional models of tax compliance emphasize that taxpayers make strategic tax reports, underreporting income to the extent that this behavior is functionally rewarded. In contrast to this view, considerable empirical evidence suggests that many taxpayers are inherently honest, reporting truthfully regardless of the incentive to cheat. In this article we build a game-theoretic model of tax compliance that includes both honest and potentially dishonest taxpayers. We show that including honest taxpayers significantly alters the model, leading to much improved empirical predictions and somewhat different and novel policy implications.

The Safety Regulation of U.S. Nuclear Power Plants: Violations, Inspections, and Abnormal Occurrences

Data from more than 1,000 inspections to the Nuclear Regulatory Commission form the basis for an investigation into the nature of safety regulation at U.S.commercial nuclear reactors. Poisson (and binary choice) models of the rate of occurrence of violations during each inspection period are specified and are extended to control for nondetection and for the possibility that violations persist from one inspection to the next. These models are used to study the factors associated with noncompliance, relative rankings of plants according to propensity to violate, the variation in detection rates among NRC inspectors, and the relationship between undetected violations and abnormal occurrences.

Management of a Common Currency

This paper presents a simple general equilibrium model of two countries using a common currency. The goal is to study how the monetary arrangement influences the optimum financing of a public good. If the two countries are allowed to print the common currency autonomously, they will finance their fiscal spending with money, oversupplying the public good and crowding out the private sector. The possibility to export part of the inflation creates a distortion in incentives such the resulting equilibrium is strictly welfare inferior to the one prevailing under flexible exchange rates. If the management of the common currency is deferred to an international central bank, each country will try to use domestic policy variables (taxes) to manipulate in its favor the actions of the bank. With no independent domestic taxes, the bank can improve welfare. However, its policies naturally support the larger country, and to induce the smaller one to participate requires giving it a disproportionately large, politically unrealistic, representation in the banks objective function.

The Spillover Effect of Antitrust Enforcement

We address the question of how the threat of antitrust enforcement spills over from one industrial submarket to another. We build a formal model describing the technology through which an initial antitrust indictment can reveal evidence of additional infractions in the same industry. Our approach is organized around the belief that the flow of information on antitrust violations is closely linked to commodity flows. As it turns out, our method proves able to explain the differential response of highway construction cartels in various states to recent changes in the severity of antitrust sanctions.

Analysis of a Strategic Terror Organization

The authors model a terrorist organization’s choice over the scale and planning horizon of terror attacks and the consequences for the organization’s evolution. The organization can engage in short-term attacks planned and executed in a single period, characterized by a low fixed cost and relatively high marginal cost, and longer term attacks planned and executed over two periods, having a high fixed cost but relatively low marginal cost. Longer term attacks require more resources and cause more damage if successful. Successful attacks increase the organization’s size; in addition, the organization has a natural growth rate. Attacks can fail because of failed execution or counterterror interdiction. In a two-period version of this model, the authors analyze the terror organization’s attack decisions. They use simulations to characterize optimal strategies and explore their implications for the growth of the organization. The authors identify a set of strategic regimes, and the results show that they always occur in a fixed order as a function of the organization’s initial strength.

Employee opportunism and redundancy in firms

Abstract Firms who share specialized information or client connections with their employees expose themselves to the risk of opportunism, in which their workers leave the firm and go into business for themselves. Legal and contractual solutions to the problem of employee opportunism are not always viable. Instead, firms may organize themselves so as to discourage opportunism. We study an organizational scheme called internal redundancy: the practice of assigning employees to overlapping tasks so that they are less likely to possess sole access to trade secrets or customers, and therefore, less likely to profit if they leave the firm.

Asymmetric information, accounting manipulations, and partnerships

Abstract I present a simple model that illustrates how asymmetric information can generate a theory of the formation of partnerships. In the model I develop there are a large number of pairs of entrepreneurs, and each pair must decide whether to form a partnership or remain separate. Each entrepreneur is of either high or low ability, and entrepreneurs require bank financing. There are two sources of asymmetry of information: the fact that banks do not observe entrepreneurial ability; and the possibility of accounting manipulations in which a partnership shifts profits from the line-item account of one of its partners to the line-item of the other. Analysis of the model reveals a small and intuitively appealing set of possible equilibria, in which some entrepreneurial pairs merge and others do not. In particular, pairs of similar ability are most likely to merge, and pairs of unlike ability in which the high ability individual controls the more informative technology are least likely to merge. The model also has implications for merger policy, and suggests a relationship between interest rates and merger activity.

The number of undocumented immigrants in the United States: Estimates based on demographic modeling with data from 1990 to 2016

We apply standard demographic principles of inflows and outflows to estimate the number of undocumented immigrants in the United States, using the best available data, including some that have only recently become available. Our analysis covers the years 1990 to 2016. We develop an estimate of the number of undocumented immigrants based on parameter values that tend to underestimate undocumented immigrant inflows and overstate outflows; we also show the probability distribution for the number of undocumented immigrants based on simulating our model over parameter value ranges. Our conservative estimate is 16.7 million for 2016, nearly fifty percent higher than the most prominent current estimate of 11.3 million, which is based on survey data and thus different sources and methods. The mean estimate based on our simulation analysis is 22.1 million, essentially double the current widely accepted estimate. Our model predicts a similar trajectory of growth in the number of undocumented immigrants over the years of our analysis, but at a higher level. While our analysis delivers different results, we note that it is based on many assumptions. The most critical of these concern border apprehension rates and voluntary emigration rates of undocumented immigrants in the U.S. These rates are uncertain, especially in the 1990’s and early 2000’s, which is when—both based on our modeling and the very different survey data approach—the number of undocumented immigrants increases most significantly. Our results, while based on a number of assumptions and uncertainties, could help frame debates about policies whose consequences depend on the number of undocumented immigrants in the United States.