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American Economic Journal: Economic Policy

Vol. 7, Issue 1 – February 2015

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Front Matter (#1)
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Inflation Expectations and Readiness to Spend: Cross-Sectional Evidence (#2)
Rüdiger Bachmann, Tim O. Berg and Eric R. Sims
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Taxes on the Internet: Deterrence Effects of Public Disclosure (#3)
Erlend E. Bø, Joel Slemrod and Thor O. Thoresen
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Is There a Link between Foreclosure and Health? (#4)
Janet Currie and Erdal Tekin
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The Impact of Including, Adding, and Subtracting a Tax on Demand (#5)
Naomi E. Feldman and Bradley J. Ruffle
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The Role of Proximity in Foreclosure Externalities: Evidence from Condominiums (#6)
Lynn M. Fisher, Lauren Lambie-Hanson and Paul Willen
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The Effects of Voting Costs on the Democratic Process and Public Finances (#7)
Roland Hodler, Simon Luechinger and Alois Stutzer
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Income, the Earned Income Tax Credit, and Infant Health (#8)
Hilary Hoynes, Doug Miller and David Simon
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Using Taxes to Reduce Carbon Dioxide Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden (#9)
Thomas Klier and Joshua Linn
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Diagnosing Hospital System Bargaining Power in Managed Care Networks (#10)
Matthew S. Lewis and Kevin E. Pflum
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Would People Behave Differently If They Better Understood Social Security? Evidence from a Field Experiment (#11)
Jeffrey B. Liebman and Erzo F. P. Luttmer
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Quasi-Experimental Evidence on the Connection between Property Taxes and Residential Capital Investment (#12)
Byron Lutz
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New Estimates of the Value of a Statistical Life Using Air Bag Regulations as a Quasi-experiment (#13)
Chris Rohlfs, Ryan Sullivan and Thomas Kniesner
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(1) Front Matter
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(2) Inflation Expectations and Readiness to Spend: Cross-Sectional Evidence
Rüdiger Bachmann, Tim O. Berg and Eric R. Sims
There have been suggestions for monetary policy to engineer higher inflation expectations to stimulate spending. We examine the relationship between expected inflation and spending attitudes using the microdata from the Michigan Survey of Consumers. The impact of higher inflation expectations on the reported readiness to spend on durables is generally small, outside the zero lower bound, often statistically insignificant, and inside of it typically significantly negative. In our baseline specification, a one percentage point increase in expected inflation during the recent zero lower bound period reduces households‘ probability of having a positive attitude towards spending by about 0.5 percentage points. (JEL D12, D84, E21, E31, E52)
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(3) Taxes on the Internet: Deterrence Effects of Public Disclosure
Erlend E. Bø, Joel Slemrod and Thor O. Thoresen
Although Norway has a long tradition of public disclosure of tax filings, starting in 2001 anyone with Internet access could obtain individual information on income and income taxes paid. We examine the effect on income reporting of this change in the degree of public disclosure, making use of the fact that prior to 2001, in some municipalities, tax information was distributed widely through locally produced paper catalogs. We find an approximately 3 percent higher average increase in reported income among business owners living in areas where the switch to Internet disclosure represented a large change in access. (JEL H24, H25, H26)
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(4) Is There a Link between Foreclosure and Health?
Janet Currie and Erdal Tekin
We investigate the relationship between foreclosures and hospital visits using data on all foreclosures and all hospital and emergency room visits from four states that were among the hardest hit by the foreclosure crisis. We find that living in a neighborhood with a spike in foreclosures is associated with significant increases in urgent unscheduled visits, including increases in visits for preventable conditions. The estimated relationships cannot be accounted for by increasing unemployment, declines in housing prices, migration, or by people switching from out-patient providers to hospitals. (JEL D14, F12, R31)
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(5) The Impact of Including, Adding, and Subtracting a Tax on Demand
Naomi E. Feldman and Bradley J. Ruffle
We test the equivalence of tax-inclusive, tax-exclusive and tax-rebate prices through a series of experiments differing only in their handling of the tax. Subjects receive a cash budget and decide how much to keep and how much to spend on various attractively priced goods. Subjects spend significantly more under tax-exclusive prices whereas total purchases under tax-inclusive and tax-rebate prices are similar. These results persist throughout most of the ten rounds despite feedback and the ability to revise purchases. The asymmetric response to tax liabilities and rebates highlights consumers‘ ability both to internalize and to willfully ignore hidden price components. (JEL D12, H25, H31)
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(6) The Role of Proximity in Foreclosure Externalities: Evidence from Condominiums
Lynn M. Fisher, Lauren Lambie-Hanson and Paul Willen
We measure the effect of foreclosures on the sale prices of nearby properties using a dataset of condominiums in Boston. A foreclosure in the same association and at the same address depresses the sale price by 2.5 percent, but properties in the same association but located at a different address have an effect that is tightly estimated at zero. Since properties in the same association are close substitutes, we argue that the evidence points against the pecuniary externality of property coming on the market and toward a physical externality as the source of measured foreclosure externalities. (JEL R31)
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(7) The Effects of Voting Costs on the Democratic Process and Public Finances
Roland Hodler, Simon Luechinger and Alois Stutzer
Increasing the attractiveness of voting is often seen as a remedy for unequal participation and the influence of special-interest groups on public policy. However, lower voting costs may also bring less informed citizens to the poll, thereby inviting efforts to sway these voters. We substantiate this argument in a probabilistic voting model with campaign contributions. In an empirical analysis for the 26 Swiss cantons, we find that lower voting costs due to postal voting are related to higher turnout, lower average education and political knowledge of participants as well as lower government welfare expenditures and lower business taxation. (JEL D72, H25, H75, I20, I38)
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(8) Income, the Earned Income Tax Credit, and Infant Health
Hilary Hoynes, Doug Miller and David Simon
This paper uses quasi-experimental variation from federal tax reform to evaluate the effect of the EITC on infant health outcomes. We find that the EITC reduces the incidence of low birth weight and increases mean birth weight: a $1,000 treatment-on-the-treated leads to a 2 to 3 percent decline in low birth weight. Our results suggest that the candidate mechanisms include more prenatal care and less negative health behaviors (smoking). Additionally, we find a shift from public to private insurance coverage, and for some a reduction in insurance overall, indicating a potential change in the quality and perhaps quantity of coverage. (JEL H24, I12, I38, J13)
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(9) Using Taxes to Reduce Carbon Dioxide Emissions Rates of New Passenger Vehicles: Evidence from France, Germany, and Sweden
Thomas Klier and Joshua Linn
France, Germany, and Sweden link taxes to passenger vehicles‘ carbon dioxide (CO2) emissions rates. Based on new vehicle registration data from 2005 to 2010, we find that CO2 taxes reduce registrations. The effect is larger in France than in either Germany or Sweden, and the French results are robust to alternative estimation models. Compared with those of France, the German results vary somewhat more, and the Swedish estimates are the least robust. We find some evidence that the French tax affected the mix of new vehicles that vehicle manufacturers offered in the French market. (JEL H23, L62, Q54, Q58)
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(10) Diagnosing Hospital System Bargaining Power in Managed Care Networks
Matthew S. Lewis and Kevin E. Pflum
We investigate the impact of hospital system membership on negotiations between hospitals and managed care organizations (MCOs). Previous research finds that system hospitals secure higher reimbursements by exploiting local market concentration. By leveraging system membership in the bargaining game, however, system hospitals may also extract a higher percentage of their value to an MCO. Our findings reveal that more of the observed price gap between system and nonsystem hospitals can be attributed to bargaining power differences than to differences linked to relative concentration. These results highlight the importance of explicitly modeling the bargaining process when evaluating negotiated-price markets more generally. (JEL C78, I11, I13, L14)
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(11) Would People Behave Differently If They Better Understood Social Security? Evidence from a Field Experiment
Jeffrey B. Liebman and Erzo F. P. Luttmer
This paper presents the results of a randomized field experiment that provided information about key Social Security features to older workers. The experiment was designed to examine whether it is possible to affect individual behavior using a relatively inexpensive informational intervention about the provisions of a public program and to explore the mechanisms underlying the behavior change. We find that our relatively mild intervention (sending an informational brochure and an invitation to a web-tutorial) increased labor force participation one year later by 4 percentage points relative to the control group mean of 74 percent. (JEL C93, D12, H55)
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(12) Quasi-Experimental Evidence on the Connection between Property Taxes and Residential Capital Investment
Byron Lutz
Do low property taxes attract new home construction? This question is answered using a large shock to property tax burdens caused by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a substantial increase in residential construction. In the area of the state near the region’s primary urban center (Boston), however, the shock clears through a price adjustment�i.e., by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. (JEL H71, H73, R31)
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(13) New Estimates of the Value of a Statistical Life Using Air Bag Regulations as a Quasi-experiment
Chris Rohlfs, Ryan Sullivan and Thomas Kniesner
Due to federal regulations, automobile air bag availability was a model-specific discontinuous function of model year for used vehicles in the 1990s and early 2000s. We use the discontinuities and the gradual increase in the supply of air bags to trace out the demand curve for air bags and the implied distribution of the Value of a Statistical Life (VSL) across consumers. Although imprecise, our preferred point estimates indicate that the median VSL is between $9 million and $11 million and that a sizable portion of consumers placed negative values on air bags, probably due to distrust of the technology. (JEL D12, J17, L51, L62)
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