Support for Public Provision of a Private Good with Top-Up and Opt-Out: A Controlled Laboratory Experiment
(with Kate Cuff , Jerry Hurley, Stuart Mestelman, Stephanie Thomas and David Cameron)
Journal of Economic Behavior and Organization , 111, 177-196, 2015
Abstract: This paper presents the results of a revealed-choice experiment testing the theoretical predictions of political economy models regarding public support for a publicly provided private good financed with proportional income taxes when individuals can purchase the good privately and either continue to consume public provision (‘top-up’) or forego public provision (‘opt-out’), but in each case continue to pay income taxes. Our laboratory results confirm behavior is consistent with the predicted majority-preferred tax rate under mixed financing with top-up, but we identify preferences for significantly higher rates of public provision than predicted under mixed financing with opt-out. Using non parametric regression analysis, we explore the relationship between individuals’ top-up and opt-out decisions and both their income levels and the implemented tax rates.
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An Experimental Investigation of Mixed Systems of Public and Private Health Care Finance
(with Kate Cuff , Jerry Hurley, Logan McLeod, Stuart Mestelman, and David Cameron)
Journal of Economic Behavior and Organization , 84(3), 713-729, 2012
Abstract: This paper presents the results of a revealed-choice experiment testing the theoretical predictions of a model of a mixed system of public and private finance. We investigate behavioural responses in individuals’ willingnesses-to-pay for private health insurance to changes in the public sector allocation rule (needs-based vs. random), the supply of health care resources, and the size of the public health care budget. Of particular interest is how willingness-to-pay for private insurance feeds back into the determination of the equilibrium price of health care resources, the probability of public treatment and which individuals are left untreated. Our findings are generally consistent with the predictions of the theoretical model, although individuals consistently exhibit greater willingnesses-to-pay for private insurance than predicted resulting in a larger than predicted amount of private insurance being purchased. A commonly used risk-aversion measure only partially explains this observed deviation. We also find that, relative to a system of public financing only, a mixed system of health care finance results in higher health care prices and sicker, poorer people being left untreated.
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Willingness-to-Pay for Parallel Private Health Insurance: Evidence from a Laboratory Experiment
(with Kate Cuff , Jerry Hurley, Logan McLeod, Robert Nuscheler, and David Cameron)
Canadian Journal of Economics , 45(1), 137-166, 2012
Abstract: Debate over the effects of public versus private health care finance persists in both academic and policy circles. This paper presents the results of a revealed preference laboratory experiment that tests how characteristics of the public health system affect a subject's willingness-to-pay (WTP) for parallel private health insurance. Consistent with the theoretical predictions of Cuff et al. (2010) , subjects’ average WTP is lower and the size of the private insurance sector smaller when the public system allocates health care based on need rather than randomly and when the probability of receiving health care from the public system is high.
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Judgments Regarding the Fair Division of Goods: The Impact of Verbal versus Quantitative Descriptions of Alternative Divisions
(with Jerry Hurley, Kate Cuff, Mita Giacomini and David Cameron)
Social Choice and Welfare , 37(2), 341-372, 2011
Abstract: This article uses a stated-preference survey to investigate the impact on judgments regarding the fair division of a fixed supply of a good of differing types of information by which to describe five distributional principles. The three types of information are quantitative information only (the predominant approach in existing studies), verbal information only, and both quantitative and verbal information. The five distributional principles are equal division among recipients, Rawlsian maximin, total benefit maximization (TBM), equal benefit (EB) for recipients, and allocation according to relative need (RN) among recipients. We find important informational effects on judgments of the fair division of each of two health-related goods (pain-relief pills and apples consumed to obtain an essential vitamin): judgments based on quantitative information only are consistent with previous research; changing to verbal descriptions causes a notable shift in support among principles, and in particular greater support for the principle of TBM; judgments based on both quantitative and verbal information match more closely those made with only quantitative information. The pattern of judgments is consistent with the hypothesis that subjects do not fully understand the relationship between the conceptual meaning of the principles (as described verbally) and their implied quantitative divisions. We also find evidence of modest differential judgments across goods (pills vs. apples), sample effects (university vs. community), and sex effects, and little support for a non-zero allocation principle.
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Output Sharing in Partnerships as a Common Pool Resource Management Instrument
(with Stephan Schott, Stuart Mestelman, and R. Andrew Muller)
Environmental and Resource Economics , 37(4), 697-711, 2007
Abstract: Many economic environments are susceptible to either free-riding or overuse. Common pool resources (CPRs) fall in the latter category. Equally sharing the output of a CPR in partnerships introduces a free-riding incentive that may offset overuse. Socially optimal harvesting can be induced by dividing the set of resource users into a number of partnerships in such a way that each resource users’ tendency to over-harvest from the resource is exactly offset by his or her tendency to free-ride on the contributions of others. We conduct a laboratory experiment to assess the performance of this partnership solution by introducing equal-sharing subgroups of size one, four and six into a twelve-person CPR environment. Group assignment is either unchanging throughout a 15 period session or randomly mixed each decision round. Group size significantly affects aggregate effort, while group assignment makes no significant difference. The distribution of total payoffs is more equitable for randomly mixed groups. Implications of our results for voluntary and centralized implementations of the partnership solution are discussed.
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Implications of Alternative Emission Trading Plans: Experimental Evidence
(with Stuart Mestelman and R. Andrew Muller)
Pacific Economic Review , 11(2), 149-166, 2006
Abstract: Two approaches to emissions trading are cap-and-trade, with an aggregate cap on emissions distributed as emission allowances, and baseline-and-credit, with firms earning emission reduction credits for emissions below baselines. Theory suggests the long-run equilibria of the plans will differ with baselines proportional to output. To test this prediction we develop a computerized environment in which subjects representing firms can adjust their emission rates and capacity levels and trade emission rights in a sealed-bid auction. Demand for output is simulated. We report on six laboratory sessions with variable emissions rates, but fixed capacity: three each with the cap-and-trade and baseline-and-credit mechanisms.
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The Transition from Good to Poor Health: An Econometric Study of the Older Population
(with Frank T. Denton, A. Leslie Robb, and Byron G. Spencer)
Journal of Health Economics , 23(5), 1013-1034, 2004
Abstract: This is a study of the influence of socioeconomic factors on the state of health of older Canadians. Three years of panel data from the Survey of Labour and Income Dynamics are used to model the transition probabilities between good and poor health. Care is taken to avoid the problem of endogeneity of income in modelling its effects, and to adjust reported income to free it from its strong association with age at the time of the survey. Of particular note are the significant effects found for income, in spite of universal public health care coverage. Significant effects are found also for age, education, and other variables.
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Subsidizing Public Inputs
(with Stuart Mestelman and Mohamed Shehata)
Journal of Public Economics , 87(3-4), 819-846, 2003
Abstract: Investment in research and development may (with some probability) lead to reductions in a firma?â„¢s production cost. If the production-cost savings associated with successful research and development is freely disseminated to other firms as soon as it is realized, too few resources may be allocated to this input. In such an environment, subsidies to the public input can lead to optimal input use. Four alternative subsidy instruments are considered in this paper. Two are incremental subsidies and the others are conventional level subsidies. One of the incremental subsidies and one of the level subsidies crudely capture characteristics of incentive mechanisms used in the United States and Canada. A laboratory implementation of these instruments generally confirms that incremental subsidies are inferior to level subsidies.
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Value Orientations, Income and Displacement Effects, and Voluntary Contributions
(with Kenneth S. Chan, James Chowhan, Stuart Mestelman and Mohamed Shehata)
Experimental Economics , 4(2), 183-195, 2001
Abstract: Identifying the value orientations of subjects participating in market or non-market decisions by having them participate in aring game may be helpful in understanding the behaviour of these subjects. This experiment presents the results of changes in the centre and the radius of a value orientationsring in an attempt to discover if the measured value orientations exhibit income or displacement effects. Neither significant income effects nor displacement effects are identified. An external validity check with a voluntary contribution game provides evidence that value orientations from rings centred around the origin of the decision-space explain significant portions of voluntary contributions while value orientations from displaced rings do not.