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Essays in public economics


Balan Cohen, Andreea (2007). Essays in public economics. Master's thesis / Doctoral dissertation.


The following three essays deal with topics in public finance, health economics, and political economy. In the first essay I address the question of how much government programs have improved the well-being of the most vulnerable elderly. To analyze this question, I examine the impact of Old Age Assistance (OAA) -- the first significant U.S. welfare program for the elderly -- on the mortality of older Americans from 1930-1955. I construct two new data sets: a database of OAA benefits and rules, and a database of mortality by age, race, gender, and cause of death. To control for the joint determination of income and mortality, I use a simulated instrumental variables approach that relies on exogenous changes in OAA legislation at the state and year level. I find a substantial reduction in mortality for many vulnerable elderly groups, especially poor males. Mortality decreased mainly because of declines in risky behavior, infectious diseases (after the introduction of antibiotics) and suicides. Household survey analyses reveal changes in consumption consistent with these patterns. Overall, OAA income transfers were highly effective in preventing deaths among the elderly poor by increasing their access to health care and altering their behavior. In the second essay, I estimate the impact of parental alcohol consumption on child health by taking advantage of a unique shock to alcohol supply: the 1985 to 1988 alcohol prohibition campaign in Russia. This campaign was temporally short lived, and resulted in large amounts of exogenous geographic variation in its intensity and effectiveness. I construct a new data set that combines the Russian Longitudinal Monitoring Survey with regional data on alcohol consumption. I find significant improvements in child height, immunization rates, and chronic conditions among children born during prohibition who also lived in regions with effective anti-alcohol campaigns. I find no effect on children born either before or after prohibition. This confirms the effect of investments during a child's first three years of life on long-term health measures, and demonstrates a potential positive effect of suppressing parental access to alcohol. Furthermore, evidence from vaccination rates suggests that the positive effect of prohibition on child health occurred through improvements in parental time, rather than income resources. In the third essay, we use the variation in political incentives of state governors provided by term limits to show that the variation in the level of OAA benefits per recipient between 1931 and 1955 was due to governors' vote seeking behavior. Governors who faced reelection were more likely to increase benefits than 'lame duck' office holders. The manipulation of OAA increased with the degree of political competition, and decreased in the presence of strong lobbying groups for alternate spending programs. We also find that the manipulation of OAA policy was greater in states with a smaller fraction of elderly in the population, presumably due to the increased costs of enacting programs. This paper provides evidence that the elderly wielded significant political power in the United States at least two decades earlier than previous studies have suggested. Copies of dissertations may be obtained by addressing your request to ProQuest, 789 E. Eisenhower Parkway, P.O. Box 1346, Ann Arbor, MI 48106-1346. Telephone 1-800-521-3042; email:


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Balan Cohen, Andreea