Research  

Health and Labor Economics:

The Health Consequences of Retirement  (PDF - forthcoming in the Journal of Human Resources)

This paper examines the impact of retirement on individuals' health. Declines in health commonly compel workers to retire, so the challenge is to disentangle the simultaneous causal effects. The estimation strategy employs an instrumental variables specification. The instrument is based on workers' self-reported probabilities of working past ages 62 and 65, taken from the first period in which they are observed. Results indicate that the retirement effect on health is beneficial and significant. Investigation into behavioral data, such as smoking and exercise, suggests that retirement may affect health through such channels; with additional leisure time, many retirees practice healthier habits.

Health Effects of the American Diet: The Case of Immigrants (with Sukanya Basu - new version coming soon)

We compare body mass index (BMI) of immigrants in the United States to natives' and observe that immigrants' BMI converges to natives' as their length of residency increases. Using the National Health and Nutritional Examination Survey, we find that BMI convergence persists after controlling for demographic and physical characteristics. We explore the root causes of this “catch-up effect,” determining that it occurs primarily because of changes in nutrition: with more years of residency, immigrants adopt higher-fat diets. We note that immigrants' physical activity levels actually improve with their length of stay, providing further evidence of the importance of dietary choices.

Applied Behavioral Finance:

“Open Line of Credit:” Under No Borrowing Constraints, How Do Young Adults Invest? (with James Compton and Pamela Schmitt - PDF - submitted)

Students at the United States Naval Academy have the opportunity to take a “Career Starter Loan.” Two military-oriented banks provide these loans exogenously at a low interest rate that does not depend on individual credit scores. Using survey data, this paper examines investment behavior in relation to risk profiles, self-reported planning horizons, and other individual characteristics. The data offers novel insights into the investment behavior of college-aged individuals, an infrequently studied group in behavioral finance. Simple OLS and Tobit models reveal that: (1) cognitive ability is strongly and positively associated with more investment and riskier choices; (2) demographic background characteristics relate to investment behavior, as respondents from wealthier backgrounds invest more and with more risk; (3) individuals with superior financial literacy tend to invest more, typically in equity markets; (4) personality traits, such as the Myers-Briggs Type Indicator and planning horizon length, can also predict investment behavior. Lastly, we explore a notion of “investment exuberance” to see which factors might relate to young investors’ confidence in their choices.

Does Everyone Accept a Free Lunch? Decision Making Under (almost) Zero Cost Borrowing (with James Compton and Pamela Schmitt - PDF - submitted)

We examine decision making by a group of college students who have the opportunity to take out a sizable, very low-interest, non-credit dependent loan which, if simply invested in low-risk assets, would effectively yield a free lunch in net interest earnings. We exploit this natural experiment to study the characteristics of those willing and unwilling to take the loan. We characterize the latter as debt averse, and for those who accept the loan, we also consider whether they anticipate repaying it early. In particular, we use simple linear and non-linear binary choice models to explore how these two decisions relate to individual and family demographics as well as socio-economic characteristics, personality traits (as measured by the Myers-Briggs Type Indicator), cognitive ability (as measured by the Cognitive Reflection Test), and intellectual ability (as measured by SAT scores and grade point average). We find no consistent relationships between debt aversion and intellectual ability or gender. Individuals willing to accept the loan tend to have prior debt, longer planning horizons, come from middle-income families, and may have higher cognitive ability.

Housing and Neighborhood Choice:

Did the Pursuit of Good Schools Contribute to the U.S. Housing Bubble? (with Kurtis Swope - PDF - submitted)

In the United States, access to a public school is typically linked directly to residential location. Homebuyers seeking good public schools, therefore, may pay more for housing if school quality is capitalized into the market value of homes in the highest-performing districts, if homes in high-performing districts are larger on average, and if affordable rental housing in such districts is limited. This study examines the link between housing expenditures, household characteristics, and school quality during the critical years of the U.S. housing bubble. Using data from the American Housing Survey 2001-2009, we find that households’ expenditures for homes in neighborhoods with “good schools”, and the resulting mortgage-to-income ratios for households seeking good schools, both rose during the key bubble period relative to the periods before and after the bubble, providing evidence that the pursuit of good schools may have contributed to the housing bubble. These findings are robust to a number of methodological approaches, including difference in differences and propensity score matching.