Mark C. Berger

Schooling, Self-Selection, and Health.

Economists have long realized that schooling and good health are strongly positively correlated. Some conclude that schooling has a direct positive effect on the production of good health while others argue that some unobserved variable such as rate of time discount positively affects both health and schooling. This study investigates the validity of alternative explanations for the observed schooling-health correlation. Models are estimated using four different measures of overall health: disability, functional limitations, and systolic and diastolic blood pressures. The results uniformly indicate that the direct effect of schooling on health is more important than the effect of unobservables.

Do Workers Pay for On-The-Job Training?

We examine the relationships among on-the-job training, starting wages, wage growth, and productivity growth. Our models suggest that training lowers starting wages, but the estimated magnitudes are small. When firms are asked directly, we find that they pay higher starting wages to workers requiring less training than is typical, but do not pay lower starting wages to workers who require more training than is typical. In contrast to the results for wage growth, we find a large, robust impact of training on productivity growth, suggesting that firms pay most of the cost and reap most of the returns to training.

Valuing Changes in Health Risks: A Comparison of Alternative Measures*

Essential to efficient provision of health, safety, and the environment is correct valuation of risks to human health. In a world of scarcity difficult decisions concerning tradeoffs between health and other desirables are unavoidable. In this paper we develop a model of health investment under uncertainty which yields a general expression for values of changes in risks to human health. The preference-based values of morbidity risks and mortality risks are ex ante dollar equivalents of changes in expected utility associated with risk changes. The preference-based values are related to two alternative measures, costs of illness and preventive expenditures, which are thought to be lower bounds on the value of risk reductions. We demonstrate that these alternative measures are not even special cases of the more general measure and that the size relationships among the three measures are complex. Also, we derive the relationship between the willingness to pay for risk changes and the consumer surpluses associated with health changes which occur with certainty. The next section contains a brief review of the approaches to valuing changes in health.

Child Care Subsidies, Quality of Care, and the Labor Supply of Low-Income, Single Mothers

The authors examine the effects of child care subsidies on the labor supply decisions of low-income mothers and o n the quality of care their children receive using newly gathered data on two programs that subsidize the child care expenditures of families in Kentucky. They find that single mothers who receive child care subsidies are more likely to be employed and are generally more satisfied with the care their children receive but subsidies have little effect on hours worked. Copyright 1992 by MIT Press.

How Well Do We Measure Training

This article compares various measures of on‐the‐job training, from a new source that matches establishments and workers, allowing us to compare the responses of employers and employees to identical training questions. Establishments report 25% more hours of training than do workers, although workers and establishments report similar incidence rates of training. Both establishment and worker measures agree that there is much more informal training than formal training. Further, informal training is measured about as accurately as formal training. Finally, we show that measurement error reduces substantially the observed effect of training, in particular the effect of training on productivity growth.

The effect of alcohol use on wages

(1988). The effect of alcohol use on wages. Applied Economics: Vol. 20, No. 10, pp. 1343-1351.

Bounding Parameter Estimates with Nonclassical Measurement Error

Abstract The bias introduced by errors in the measurement of independent variables has increasingly been a topic of interest among researchers estimating economic parameters. However, studies typically use the assumption of classical measurement error; that is, the variable of interest and its measurement error are uncorrelated, and the expected value of the mismeasured variable is equal to the expected value of the true measure. These assumptions often arise from convenience rather than conviction. When a variable is bounded, it is likely that the measurement error and the true value of the variable are negatively correlated. We consider the case of a noisily measured variable with a negative covariance between the measurement error and the true value of the variable. We show that, asymptotically, the parameter in a univariate regression is bounded between the ordinary least squares (OLS) estimator and an instrumental variables (IV) estimator. Further, we demonstrate that the OLS bound can be improved in the case where there are two noisy reports on the variable of interest. In the case of continuous variables, this lower-bound estimate is a consistent estimate of the parameter. In the case of binary or discrete noisily measured variables, we also identify point estimates using a method-of-moments framework. We then extend our bounding results to simple multivariate models with measurement error. We provide empirical applications of our analytical results using employer and employee reports on health insurance coverage and wage growth, and reports of identical twins on the level of schooling and wages. Using OLS, health insurance coverage is associated with a reduction in wage growth of 6.5–7.4%, whereas IV estimates suggest a 11.2–11.8% reduction associated with health insurance coverage. We are able to improve the lower bound estimate to 8.2% using our bounding strategy and obtain a point estimate of 8.8% using the method-of-moments framework. The estimates using the data for identical twins, though not correcting for problems such as endogenous determination of the level of schooling, do illustrate the potential usefulness of correcting for measurement error as a complement to other approaches. Using the multiple reports on the level of schooling and the our proposed estimators, we are able to tighten the spread between the upper- and lower-bound estimates of the returns to schooling from 7–10 percentage points to approximately 4 percentage points.

Measuring Amenity Benefits from Farmland: Hedonic Pricing vs. Contingent Valuation

The amenity value to Kentucky residents from horse farm land was estimated using both the contingent valuation method and the hedonic pricing method. The hedonic pricing model included both the housing and labor markets. A value function estimated from dichotomous choice contingent valuation responses showed that the value of a change in the level of the horse farm amenity was sensitive to the size of the change, with no evidence of value that is independent of the size of the change. The two methods generated estimates of the external benefits from horse farm land that were within 20 percent of each other.

Public financing of health expenditures, insurance, and health outcomes

The effects of public financing of health expenditures, insurance coverage and other factors on health outcomes are examined within health production models estimated using 1960–1992 data across 20 OECD countries. Mortality rates are found to depend on the mix of health care expenditures and the type of health insurance coverage. Increases in the publicly financed share of health expenditures are associated with increases in mortality rates. Increases in inpatient and ambulatory insurance coverage are associated with reduced mortality. The effects of GDP, health expenditures and age structure on mortality are similar to those in previous studies. Tobacco use, alcohol use, fat consumption, female labour force participation, and education levels are also significantly related to overall mortality rates. Increases in income inequality are associated with lower mortality rates, suggesting that the negative relationship between inequality and health outcomes suggested by some previous studies does not remain when a more complete model is estimated. The result that increases in public financing increase mortality rates is robust to a number of changes in specifications and samples. Thus, as countries increase the level of their health expenditures, they may want to avoid increasing the proportion of their expenditures that are publicly financed.

Valuing the Arts: A Contingent Valuation Approach

Government funding of the arts has received considerable attention in the United States in recent years. Efforts to cut funding to the National Endowment for the Arts and declining budgets for state arts agencies have raised questions about how much individuals value the arts. This paper applies the contingent valuation method to assess this value, using surveys of random households and of arts patrons. Our analysis estimated a mean willingness to pay (WTP) among all Kentucky households from