Economic evaluation of tax policies on health and well-being

This dissertation explores how tax policies impact the economic behavior of individuals and firms. In particular, I explore the link between public finance and public health. The first chapter provides an overview of the dissertation that includes three essays. The second chapter of my dissertation studies the investment decisions of kidney dialysis providers induced by differences in corporate taxes at the state level. The results have broad implications for Medicare expenditures at the local level. The third chapter examines the impact of exposure to Earned Income Tax Credit (EITC) expansions in utero and during childhood on health outcomes in adulthood. The fourth chapter evaluates the impact of the EITC on divorced mothers with a focus on remarriage decisions and spousal quality. I provide a short description of three essays below. Medicare expenditures and their growth vary dramatically across regions. Could differences in corporate taxes contribute to this geographic variation? The second chapter of this dissertation exploits differences in state corporate tax rates to study the investment decisions of chain dialysis providers and their impact on local Medicare expenditures. I focus on chain dialysis providers as they have increasingly become the dominant providers of dialysis services, and recent research has demonstrated that they have higher Medicare charges per patient than independent dialysis providers. I find that a one percent decrease in a state’s corporate income tax rate leads to a 0.3 to 0.4 percent increase in the number of chain-owned facilities per county in the state. Adding one chain-owned dialysis facility per county results in an additional $110 in Medicare drug payments per patient per year. This represents a four percent increase in average per capita drug payments and is driven by the greater use of reimbursed drugs by chain-owned facilities. Overall, my results suggest that state corporate taxes influence federal Medicare liability through the provision of health care services at the state level. The third chapter examines the impact of exposure to EITC expansions in utero and during childhood on health outcomes in adulthood using decades of variation in the federal and state EITC. Reduced-form estimates using Panel Study of Income Dynamics (PSID) and Child Development Supplement (CDS) data suggest that EITC expansions had positive effects on self-reported health status and other health measures. The favorable health outcomes are associated with increases in both family income and maternal labor supply. I find that the competing time substitution and income effects of labor supply due to credit expansions have different relative impacts at different ages, creating a ``U-shaped'' overall health effect of the credit. In addition, the child-parent interaction plays an essential role in transforming the income and time inputs into later life health outcomes. In the fourth chapter, I examine the impact of the EITC on the remarriage decisions of divorced mothers. Previous research that has studied the impact of the EITC on marriage has found generally small effects, with some studies finding positive effects and others finding negative effects. Little attention has been paid to remarriage decisions of divorced mothers and the traits of their spouses. Using four decades of Panel Study of Income Dynamics data we find that a $1,000 increase in the maximum EITC available significantly reduces the likelihood of remarriage within 3--6 years by 1.5--2 percentage points (or about 6--8 percent). Results are robust to various sets of controls using state and/or federal EITC policy variation, and are largest for younger mothers. Interestingly, we find positive but statistically insignificant effects on first marriages. Finally, we find suggestive evidence that this delay in remarriage allows these mothers to find spouses with more education and higher incomes.Ph.D.Includes bibliographical reference