Essays in macroeconomics and health economics

Thesis (Ph. D.)--University of Rochester. Dept. of Economics, 2011.Chapter 1, Health Insurance Reform and Bankruptcy. Medical bankruptcy was at the heart of the health care reform debate. According to Himmelstein et al. (2009), 62.1 percent of bankruptcies in the United States in 2007 were due to medical reasons. At the same time over 15 percent of Americans had no health insurance. The 2010 health care reform was designed to address the lack of health coverage and medical bankruptcies. In this paper, we employ a dynamic stochastic general equilibrium overlapping generations model with incomplete markets to quantitatively evaluate the impact of the health care reform on the health insurance market and the bankruptcy rate. We find that (i) the reform fails to address the bankruptcy problem as it cuts the bankruptcy rate by only 0.06 percentage point to 0.94 percent and the medical bankruptcy rate by 0.07 percentage point to 0.70 percent; (ii) the reform succeeds in providing almost universal insurance coverage with only 4.1 percent remaining uninsured; (iii) the average tax rate has to increase by 1.1 percent to finance the reform; (iv) the reform increases welfare by 5.2 percent; (v) the redistribution component of the reform drives the welfare gain by 5.8 percent, and the insurance market restructuring decreases welfare by 1.6 percent. Chapter 2, Optimal Taxation and Labor Supply. In a canonical life-cycle heterogeneous agents model the optimal capital income tax is as high as 36 percent, as reported by Conesa et al. (2009). Even though the endogenous labor supply drives this result, a typical model fails to account for the basic life-cycle features of the labor supply observed in the U.S. data. In this paper we develop a life-cycle model that replicates labor choices of households in the U.S. The model's key features are the non-linear wages and inter-vivos transfers. The former makes hours of work highly persistent and helps to account for labor choices at the extensive margin over the life cycle. The latter allows us to account for labor choices in early life up to the age of 30. We find that the optimal capital income tax is 7.4 percent, which is significantly lower than what Conesa et al. (2009) find. Finally, we show that the inter-vivos transfers have a very small impact on the optimal capital income tax