While we know a lot about how private schooling affects children’s outcomes, little is known about how parents change their economic behavior to pay for it. This paper builds and estimates a dynamic life-cycle model of female labor supply to investigate how the option of private schooling affects the trade-off mothers face between working and spending more time with their child. The model incorporates the choice of private or public school for the child and allows risk aversion and savings to capture how mothers can plan for children’s schooling in advance. Results of the structural estimation show that mother’s time with the child and private schooling are complements and that the availability of private schooling leads to more work and savings among mothers with children of school-going age. In addition, I estimate the price elasticity of private school enrollment to be -0.25. Policy simulations show that relaxing liquidity constraints for mothers increases private school enrollment by up to 80 percent, with larger effects for low-education women. I also find that targeted private school subsidies to low-income and less educated mothers can reduce inequality in children’s outcomes. However, private school subsidies affect work and saving incentives of mothers, which results in lower wages and asset accumulation over the lifecycle among less educated females.
This paper studies the effect of house price increases on the choice to enroll children in private schools. I exploit cross-city variation in local housing booms during the 2000s, which increased the net worth of households and allowed them to borrow using home equity lines of credit. To establish a causal relationship between the housing boom and the demand for private schooling, I employ instrumental variables techniques used in the literature studying the effects of the house price boom on different facets of the economy. Results show that one standard deviation larger increase in local housing demand shock of 2000-2006 increased average private school enrollment by 18%. However, this increase was counteracted by an equal decline in private school enrollment during the subsequent housing bust starting in 2007. This indicates that relaxing parental credit constraints can have significant effects on the choice of schooling and that the housing boom of the 2000s can potentially have lasting positive effects on the human capital of the next generation.
Positively Aware? Conflicting Expert Reviews and Demand for Medical Treatment
(with Nicholas Papageorge and Jorge Balat)[IZA Discussion Paper No. 10919]
We study the impact of expert reviews on the demand for HIV treatments. A novel feature of our study is that we observe two reviews for each HIV drug and focus attention on consumer responses when experts disagree. Reviews are provided by both a doctor and an activist in the HIV lifestyle magazine Positively Aware, which we merge with detailed panel data on HIV-positive men’s treatment consumption and health outcomes. To establish a causal relationship between reviews and demand, we exploit the arrival of new drugs over time, which provides arguably random variation in reviews of existing drugs. We find that when doctors and activists agree, more positive reviews increase demand for HIV drugs. However, doctors and activists frequently disagree, most often over treatments that are effective but have harsh side effects, in which case they are given low ratings by the activist but not by the doctor. In such cases, relatively healthy consumers favor drugs with higher activist reviews, thus defying the doctor, which is consistent with a distaste for side effects. This pattern reverses for individuals who are in worse health and thus face stronger incentives to choose more effective medication despite side effects. Findings suggest that consumers demand information from experts according to the trade-offs they face when making health investments in the presence of adverse treatment side effects.
Work in Progress
Shaping Careers through Public Policy: Evidence from ACA Dependent Coverage (with Ammar Farooq)
We study the role of the Affordable Care Act (ACA) dependent coverage extension on the career trajectories of young adults. The key selling point of the ACA dependent coverage law was that young adults would not be locked into jobs for employer-provided health insurance, and would be willing to shop jobs or be willing to start new ventures. The aim of this paper is to see to what extent the ACA delivered on its promise to young adults, and how it affected the long-term career of these individuals. We find that young adults were more likely to get health insurance as dependents, be less likely to be employed and more likely to be self-employed. We also find that individuals aged 19-21 were more likely to be enrolled in school. Conditional on being employed, young adults exposed to the law earned lower wages and exhibited increased job mobility. In the long-run, self-employment among 24-year-olds in 2010, who were exposed to the law for two years, increased by 31 percent and employment among this group increased by 2.5 percent. Conditional on being employed, young adults were also less likely to switch occupations in the long-run, suggesting that after the initial job shopping, young adults were better able to match with their desired occupations.
Using Indirect Inference to Estimate Structural Models with Reduced Form Estimates (with Robert Moffitt and Anthony Smith)