Submitted by Ivan Zili´cˇ Submitted at Department of Economics Supervisor and First Examiner Dr. Rudolf Winter- Ebmer Second Examiner Dr. Ren´eB¨oheim Essays in Applied September 2017 Econometrics Doctoral Thesis to obtain the academic degree of Doctor of Philosophy in the PhD Program (Doktoratsstudium) in Economics JOHANNES KEPLER UNIVERSITY LINZ Altenbergerstraße 69 4040 Linz, Osterreich¨ www.jku.at DVR 0093696 Statutory declaration I hereby declare that the thesis submitted is my own unaided work, that I have not used other than the sources indicated, and that all direct and indirect sources are acknowledged as references. This printed thesis is identical with the electronic version submitted. Ivan Žilic´ signature place and date 2 ...zahvali Tajnom za sva dobroˇcinstva. Tin Ujevi´c 3 4 Acknowledgments This thesis is a result of a five-year effort and I would like to acknowledge all people who helped me along the way. First and foremost, I would like to thank my advisor Rudolf Winter-Ebmer as I benefited greatly from his knowledge, experience, and patience. His comments, guidance and sup- port were of invaluable importance, not only for the thesis, but also for my professional development. I thank René Böheim, my co-advisor, whose sharp and constructive com- ments on early versions of papers presented in this thesis substantially improved their quality. I also thank Gerald Pruckner, a third member of my thesis comettee, who gave a beneficial input on this thesis, especially to the third chapter. I thank all the members of JKU Department of Economics, especially Katrin and Alex, for making the research process an enjoyable experience. I thank The Institute of Economics, Zagreb where I was employed as a research assistant throughout my PhD studies. Their financial support and excellent working environment enabled me to fully devote my time to research. There I also met people who helped me during my studies, especially in the beginnings. I thank all of them, especially Marina, Iva and Rubil, for their friendship and help. As I did my coursework in Madrid, I thank all the people I met there. To single out a few of them would not be justly, as we had a spectacular time as a group; thank you for everything. I also thank my Zagreb friends—Selma, Rafo, Cupiˇ c,´ Bruno, Vedran, Prebeg, Tiric,´ Vlado, Suljo and Maric—as´ they provided just enough distractions to keep me focused. I thank my mom, dad, sister and her family for all the sacrifices, for always having my back and for being a true inspiration. And finally, I thank Marina, for everything. For the help, patience, sacrifices, and support. Thank you for your love. 5 Summary This thesis consists of three chapters. In ChapterI, Effect of forced displacement on health, I analyze health consequences of forced civilian displacement that occurred dur- ing the war in Croatia 1991-1995 which accompanied the demise of Yugoslavia. Dur- ing the Serbo-Croatian conflict a quarter of Croatian territory was ceded, 22,000 people were killed, and more than 500,000 individuals were displaced. Using the Croatian Adult Health Survey 2003 I identify the causal effect of forced migration on various dimensions of measured and self-assessed health. In order to circumvent the self-selection into dis- placement, I adopt an instrumental variable approach where civilian casualties per county are used as an instrument for displacement. I find robust adverse effects on probability of suffering hypertension, tachycardia as well as on self-assessed health and Short Form Health Survey (SF-36) health dimensions. Comparing OLS to IV estimates yields a con- clusion of a positive selection into displacement with respect to latent health. Given the likely violation of the exclusion restriction, I use a method which allows the instrument to affect health outcomes directly and conclude that, even with substantial departures from the exclusion restriction, displacement still adversely affects health. ChapterII, General versus Vocational Education: Lessons from a Quasi-experiment in Croatia, presents a research which identifies the causal effect of an educational reform implemented in Croatia in 1975/76 and 1977/78 on educational and labor market out- comes. High-school education was split into two phases which resulted in reduced track- ing, extended general curriculum for pupils attending vocational training and attaching vocational context to general high-school programs. Exploiting the rules on elementary school entry and timing of the reform, I use a regression discontinuity design and pooled Labor Force Surveys 2000–2012 to analyze the effect of the reform on educational attain- ment and labor market outcomes. We find that the reform, on average, reduced the proba- bility of having university education, which I contribute to attaching professional context 6 to once purely academic and general high-school programs. I also observe heterogeneity of the effects across gender, as for males we find that the probability of completing high school decreased, while for the females we do not observe any adverse effects, only an increase in the probability of having some university education. We explain this hetero- geneity with different selection into schooling for males and females. The reform did not positively affect individuals’ labor market prospects; therefore, we conclude that the observed general-vocational wage differential is mainly driven by self-selection into the type of high school. Do physicians respond to financial incentives is the research question tackeled in Chap- ter III named Do Financial Incentives Alter Physician Prescription Behavior? Evidence from Random Patient-GP Allocations. With co-author Alexander Ahammer I address this question by analyzing the prescription behavior of physicians who are allowed to dispense drugs by themselves through onsite pharmacies. Our identification strategy rests on mul- tiple pillars. First, we use an extensive array of covariates along with multi-dimensional fixed effects which account for patient and GP-level heterogeneity as well as sorting of GPs into onsite pharmacies. Second, we use a novel approach that allows us to restrict our sample to randomly allocated patient-GP matches which rules out endogenous sort- ing as well as principal-agent bargaining over prescriptions between patients and GPs. Using administrative data from Austria, we find evidence that onsite pharmacies have a small negative effect on prescriptions. Although self-dispensing GPs seem to prescribe slightly more expensive medication, this effect is absorbed by a much smaller likelihood to prescribe something at all in the first place, causing the overall effect to be negative. 7 Contents List of Figures 11 List of Tables 12 IEffect of forced displacement on health 13 I.1 Introduction................................. 13 I.2 War and displacement in Croatia...................... 16 I.3 Data..................................... 17 I.4 Empirical strategy.............................. 22 I.4.1 Identification............................ 25 I.5 Results.................................... 28 I.5.1 Sensitivity analysis......................... 31 I.6 Conclusions................................. 35 I.7 Appendix.................................. 37 II General versus Vocational Education: Lessons from a Quasi-experiment in Croatia 39 II.1 Introduction................................. 39 II.2 Educational reform in Croatia....................... 43 II.3 Methodology and data........................... 46 II.3.1 Methodology............................ 46 II.3.2 Data................................. 48 8 II.3.3 Identification............................ 50 II.4 Results.................................... 53 II.4.1 Reduced tracking and educational outcomes............ 53 II.4.2 Heterogeneous effects....................... 54 II.4.3 Robustness............................. 60 II.4.4 Extended general curriculum and labor market outcomes..... 62 II.5 Conclusions................................. 64 III Do Financial Incentives Alter Physician Prescription Behavior? Evidence from Random Patient-GP Allocations (with Alexander Ahammer) 67 III.1 Introduction................................. 67 III.2 Related literature and our contributions.................. 70 III.3 Institutional setting............................. 72 III.3.1 Country doctors and onsite pharmacies.............. 73 III.3.2 Weekend prescriptions....................... 74 III.4 Data..................................... 75 III.5 Methodology................................ 79 III.5.1 Outcome variables......................... 79 III.5.2 Identification............................ 81 III.6 Results.................................... 84 III.6.1 Heterogeneous effects....................... 92 III.7 Conclusions................................. 93 9 IV Bibliography 96 10 List of Figures 1 Civilian casualties by county........................ 21 2 Violation of exclusion restriction...................... 34 3 Changes in high-school education in Croatia during the 1975/76 and 1977/78 reform.................................... 45 4 Discontinuity in the reform inclusion.................... 47 5 Histogram of date of birth.......................... 52 6 Regression discontinuity graphs for the highest educational attainment.. 55 7 Distribution of education by gender in 2011 for 15+ individuals..... 60 8 Educational outcomes............................ 61 9 Years of work................................ 64 10 Heterogeneous effects for different patient age groups, weekend sample, extensive margin..............................