Papers by Thomas Kniesner
Social Science Research Network, Sep 4, 2011
Social Interactions in the Labor Market * We examine theoretically and empirically social interac... more Social Interactions in the Labor Market * We examine theoretically and empirically social interactions in labor markets and how policy prescriptions can change dramatically when there are social interactions present. Spillover effects increase labor supply and conformity effects make labor supply perfectly inelastic at a reference group average. The demand for a good may also be influenced by either a spillover effect or a conformity effect. Positive spillover increases the demand for the good with interactions, and a conformity effect makes the demand curve pivot to become less price sensitive. Similar social interactions effects appear in the associated derived demands for labor. Individual and community factors may influence the average length of poverty spells. We measure local economic conditions by the county unemployment rate and neighborhood spillover effects by the racial makeup and poverty rate of the county. We find that moving an individual from one standard deviation above the mean poverty rate to one standard deviation below the mean poverty rate (from the inner city to the suburbs) lowers the average poverty spell by 20-25 percent. We further consider overall labor market outcomes by examining theoretically the socially optimal wealth distribution. Interdependence in utility can mitigate the need to transfer wealth to low-wage individuals and may require them to be poorer by all objective measures. Finally, we quantify how labor market policy changes when there are household social interactions. Labor supply estimates indicate positive economically important spillovers for adult U.S. men. Ignoring or incorrectly considering social interactions can mis-estimate the labor supply response of tax reform in the United States by as much as 60 percent.
Social Science Research Network, 2019
The value of a statistical life (VSL) is the local tradeoff rate between fatality risk and money.... more The value of a statistical life (VSL) is the local tradeoff rate between fatality risk and money. When the tradeoff values are derived from choices in market contexts the VSL serves as both a measure of the population’s willingness to pay for risk reduction and the marginal cost of enhancing safety. Given its fundamental economic role, policy analysts have adopted the VSL as the economically correct measure of the benefit individuals receive from enhancements to their health and safety. Estimates of the VSL for the United States are around $10 million ($2017), and estimates for other countries are generally lower given the positive income elasticity of the VSL. Because of the prominence of mortality risk reductions as the justification for government policies the VSL is a crucial component of the benefit-cost analyses that are part of the regulatory process in the United States and other countries. The VSL is also foundationally related to the concepts of value of a statistical life year (VSLY) and value of a statistical injury (VSI), which also permeate the labor and health economics literatures. Thus, the same types of valuation approaches can be used to monetize non-fatal injuries and mortality risks that pose very small effects on life expectancy. In addition to formalizing the concept and measurement of the VSL and presenting representative estimates for the United States and other countries our Encyclopedia selection addresses the most important questions concerning the nuances that are of interest to researchers and policymakers.
Social Science Research Network, 2000
We examine job duration patterns for evidence of health insurance-related job lock among chronica... more We examine job duration patterns for evidence of health insurance-related job lock among chronically ill workers or workers with a chronically ill family member. Using Cox proportional hazard models, we allow for more general insurance effects than in the existing literature to indicate the impact of health insurance and health status on workers' job durations. We use data for workers in Indiana predating the Health Insurance Portability and Accountability Act (HIPAA) to examine the potential impact of HIPAA on job mobility. Chronic illness reduced job mobility by about 40 percent among the workers in our sample who relied on their employers for coverage as compared to otherwise similar workers who did not rely on their employers for coverage. Our results identify previously under-appreciated job lock among chronically ill workers and workers with a chronically ill family member, clarify how one best researches job lock, and indicate the potential impact of policies aimed at alleviating job lock and promoting inter-employer worker mobility.
Other publications TiSEM, 1996
We examine the importance of possible non-random attrition to an econometric model of life cycle ... more We examine the importance of possible non-random attrition to an econometric model of life cycle labor supply including joint nonlinear taxation of wage and interest incomes and latent heterogeneity. We use a Wald test comparing attriters to nonattriters and variable addition testing based on formal models of attrition. Results from the Panel Study of Income Dynamics are that non-random panel attrition is of little concern for prime-aged male labor supply estimation because the effect of attrition is absorbed into the fixed effects. Attrition is less econometrically influential than research design decisions typically taken for granted; the wage measure or instrument set has a much greater impact on the estimated labor supply function of prime-aged men than how one includes panel attrition.
Social Science Research Network, 1997
We examine the importance of possible non-random attrition to an econometric model of life cycle ... more We examine the importance of possible non-random attrition to an econometric model of life cycle labor supply including joint nonlinear taxation of wage and interest incomes and latent heterogeneity. We use a Wald test comparing attriters to nonattriters and variable addition testing based on formal models of attrition. Results from the Panel Study of Income Dynamics are that non-random panel attrition is of little concern for prime-aged male labor supply estimation because the effect of attrition is absorbed into the fixed effects. Attrition is less econometrically influential than research design decisions typically taken for granted; the wage measure or instrument set has a much greater impact on the estimated labor supply function of prime-aged men than how one includes panel attrition.
Journal of Benefit-cost Analysis, 2023
The impact and economic merits of President Biden's Executive Order 13985 on equity depend on how... more The impact and economic merits of President Biden's Executive Order 13985 on equity depend on how the executive order is implemented. While policy discussion to date has focused on equitable outcomes, we propose framing risk equity policies in terms of equitable risk tradeoff rates based on six policy guidelines. The starting point for ex ante evaluation of equity for mortality risk policies should be the symmetric application of the value of a statistical life (VSL) to all groups. Because of the substantial heterogeneity in VSLs by income and demographic characteristics, symmetric tradeoff rates generate subsidies and deficits relative to private values of risk. Efforts to provide for distributional preferences should be grounded in an understanding of the differentials already provided through application of a uniform VSL. Targeting government programs to specific groups ex ante should be coupled with estimates of the efficiency loss based on symmetric tradeoff rates and the implicit tradeoff rate ratio relative to the average VSL needed to support the redistributive policy. Here, we propose equity guidance that could be incorporated in a revised version of Office of Management and Budget Circular A-4. We contrast the ex ante equity guidance approach with the ex post risk equity evaluation procedure that is incorporated in the Biden Administration's recently proposed Justice40 plan, where 40% of the benefits of existing programs must be targeted to certain minority groups without ex post examination of their cost effectiveness either feasible or currently planned.
Journal of Benefit-cost Analysis, 2018
Differential and Distributional Effects of Energy Efficiency Surveys: Evidence from Electricity C... more Differential and Distributional Effects of Energy Efficiency Surveys: Evidence from Electricity Consumption * Our research investigates the magnitude of the effect of residential energy efficiency audit programs on later household electricity consumption. These programs are designed to increase awareness of household energy consumption with personalized feedback that will eventually lead to behavioral changes. In this type of survey, there is only a one-time interaction between households, which participate voluntarily, and the surveyors. The objective of this study is to determine whether and to what extent such surveys lead to behavioral changes. We argue that the perceived complexity of the survey feedback will determine whether the subsequent behavior is sustainable. Then we analyze how persistent the intervention is over time and whether the effects decay or intensify. However, the main evaluation problem involving these surveys is self-selection bias. To correct for this bias, we propose two non-parametric estimators by using a kernel-based propensity score matching approach. In the first method, we use "difference-indifferences" (DID) estimations. The second estimator is quantile DID, which produces estimates on distributions. The comparison group consists of households who were not yet participating in the survey but participated later. The evidence suggest that the customers who participated in the survey reduced their electricity consumption by 6.7%, compared with customers who had not yet participated in the survey. In addition, as the quantiles of the distribution increase, the effect of the program decreases.
RePEc: Research Papers in Economics, Sep 1, 2007
Our econometric research allows for a possible response of a person's hours worked to hours typic... more Our econometric research allows for a possible response of a person's hours worked to hours typically worked by members of a multidimensional labor market reference group that considers demographics and geographic location. Instrumental variables estimates of the canonical labor supply model expanded to permit social interactions pass a battery of specification checks and indicate positive and economically important spillovers for adult men. Ignoring or incorrectly considering social interactions in male labor supply can misestimate the response to tax reform by as much as 60 percent.
RePEc: Research Papers in Economics, Oct 1, 2009
Policy Relevant Heterogeneity in the Value of Statistical Life: New Evidence from Panel Data Quan... more Policy Relevant Heterogeneity in the Value of Statistical Life: New Evidence from Panel Data Quantile Regressions * We examine differences in the value of statistical life (VSL) across potential wage levels in panel data using quantile regressions with intercept heterogeneity. Latent heterogeneity is econometrically important and affects the estimated VSL. Our findings indicate that a reasonable average cost per expected life saved cutoff for health and safety regulations is $7 million to $8 million per life saved, but the VSL varies considerably across the labor force. Our results reconcile the previous discrepancies between hedonic VSL estimates and the values implied by theories linked to the coefficient of relative risk aversion. Because the VSL varies elastically with income, regulatory agencies should regularly update the VSL used in benefit assessments, increasing the VSL proportionally with changes in income over time.
Studies in Risk and Uncertainty, 1995
Economists since Adam Smith have been interested in hedonic equilibrium, or how the characteristi... more Economists since Adam Smith have been interested in hedonic equilibrium, or how the characteristics of a good or service are related to its price. The interest encompasses both product markets, as typified by the automobile industry study of Griliches (1971), and labor markets, as in the study of worker safety and compensating wage differentials by Thaler and Rosen (1975). Econometric research summarized in Chapter 2 reveals the difficulty of estimating the hedonic equilibrium price function (Brown and Rosen 1982, Brown 1983, Epple 1987, and Kahn and Lang 1988). Theoretical research also demonstrates the impossibility of deriving an analytical solution for the hedonic equilibrium locus in the presence of uncertainty caused, for instance, by the possibility of a work-related accident or disease (Epple, p. 63). To overcome the limitations of existing econometric and theoretical research we developed a numerical simulation model capable of examining both th direct and the indirect effects of public policies geared toward improving workplace safety.
Studies in risk and uncertainty, 1995
The issue of workplace safety in the United States is crucially linked to two public policies int... more The issue of workplace safety in the United States is crucially linked to two public policies intended to reduce worker injury and disease incidence: (1) state workers’ compensation insurance (WC) and (2) the federal Occupational Safety and Health Act of 1970 (OSHA). In general, economists have studied OSHA and WC separately.1 Feldstein (1977) and others, however, have argued that researchers need to devote more attention to examining and describing public policy interactions given the potential for subtle and not so subtle counterbalancing effects. Using the numerical simulation framework described in the previous chapter, we now examine how mandatory insurance (WC) and the direct regulation of transaction characteristics (OSHA) interact in the labor market to affect long-term equilibrium outcomes with a view toward identifying straightforward safety enhancing refinements in the safety policy package.
Oxford University Press eBooks, 2015
We survey some of the key problems confronting empirical applications in labor economics and how ... more We survey some of the key problems confronting empirical applications in labor economics and how panel data can be utilized to robustly estimate parameters of economic interest. Topics include whether and how to introduce heterogeneity in intercept and slope parameters; measurement errors in regressors; endogeneity bias and associated panel instrumental variables estimators; sample composition dynamics to control for selection on (un)observables; and model specification and selection issues such as a static or dynamic framework. The pedagogical framework for our discussion is the Mincer-type human-capital wage equation used in quantifying the value of statistical life (VSL) in labor market data. We show in our application that whether we control for latent intercept heterogeneity is more important than how, and conditional on latent heterogeneity, the robust range of VSL estimates is in the $6 million $10 million range when we additionally address measurement error, endogeneity, and dynamics.
Social Science Research Network, 2008
Any opinions expressed here are those of the author(s) and not those of IZA. Research published i... more Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No.
Other publications TiSEM, 1996
We develop a synthetic difference-indifferences statistical design to apply to experimental data ... more We develop a synthetic difference-indifferences statistical design to apply to experimental data for adult women living in Hennepin County, Minnesota, to estimate the impact of Medicaid managed care on various modes of medical care use. Because the outcomes of interest are utilization counts with many persons using none of a particular mode of care we use count regression models that are adjusted for excessive zeros. We find no reductions in physician visits or hospital inpatient and emergency department care use, but reductions in hospital outpatient care. Simulations designed to judge the economic significance of our results suggest a program effect that is a savings of about ten percent.
Social Science Research Network, 2000
Washington Regional Bulk Mail Center, and when she saw the appalling conditions the facility's em... more Washington Regional Bulk Mail Center, and when she saw the appalling conditions the facility's employees must work in, she asked them why they didn't quit. The universal response was that the pay was too good to pass up. The postal workers are, in effect, being paid to risk life and limb." Jack Anderson, Washington Post, March 7, 1979. In 1997, 6,218 workers in the United States died from an accident on the job and another 1,833,400 were hurt seriously enough to require at least one day away from work to recuperate. We all want fewer work-related injuries and diseases. How can we design the best public policy to reduce them?
Social Science Research Network, 2008
Distribution of Wealth and Interdependent Preferences * We examine the socially optimal wealth di... more Distribution of Wealth and Interdependent Preferences * We examine the socially optimal wealth distribution in a two-person two-good model with heterogeneous workers and asymmetric social interactions where only one (social) individual derives positive or negative utility from the leisure of the other (non-social) individual. We show that the interdependence can effectively counteract the need to transfer wealth to lowwage individuals and may require them to be poorer by all objective measures. We demonstrate that in the presence of social interactions it can be socially desirable to keep substantial wealth inequality.
Social Science Research Network, 1997
We develop a synthetic difference-indifferences statistical design to apply to experimental data ... more We develop a synthetic difference-indifferences statistical design to apply to experimental data for adult women living in Hennepin County, Minnesota, to estimate the impact of Medicaid managed care on various modes of medical care use. Because the outcomes of interest are utilization counts with many persons using none of a particular mode of care we use count regression models that are adjusted for excessive zeros. We find no reductions in physician visits or hospital inpatient and emergency department care use, but reductions in hospital outpatient care. Simulations designed to judge the economic significance of our results suggest a program effect that is a savings of about ten percent.
Social Science Research Network, 2010
We address long-standing concerns in the literature on compensating wage differentials: the econo... more We address long-standing concerns in the literature on compensating wage differentials: the econometric properties of the estimated value of statistical life (VSL) and the wide range of such estimates. We confront prominent econometric issues using panel data, a more accurate fatality risk measure, and systematic application of panel data estimators. Controlling for measurement error, endogeneity, latent individual heterogeneity possibly correlated with regressors, state dependence, and sample composition yields VSL estimates of $4 million to $10 million. The comparatively narrow range clarifies the cost-effectiveness of regulatory decisions. Most important econometrically is controlling for latent heterogeneity; less important is how one does it.
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Papers by Thomas Kniesner