DEMAND AND WELFARE IN HEALTH ECONOMICS A Dissertation by MANUEL HOFFMANN Submitted to the Office of Graduate and Professional Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Chair of Committee, Ragan Petrie Committee Members, Marco Castillo Jason Lindo Dr. Laura Dague Head of Department, Timothy Gronberg May 2020 Major Subject: Economics Copyright 2020 Manuel Hoffmann ABSTRACT In this dissertation I present three projects related to the topic demand and welfare in health eco- nomics by leveraging changes in technology, institutions and policies through quasi-experimental and experimental approaches. In the first essay "Television, Health, and Happiness", which is joint work with Adrian Chadi, we study the consequences of television consumption. Watching television is the most time- consuming human activity besides work but its role for individual well-being is unclear. Negative consequences portrayed in the literature raise the question whether this popular activity consti- tutes an economic good or whether it is an economic bad and hence serves as a prime example of irrational behavior reducing individual health and happiness. We are the first to comprehen- sively address this question by exploiting a large-scale natural experiment in West Germany, where households in a few geographically restricted areas received commercial television via terrestrial frequencies. Rich panel data allow us to determine how signal availability over time changes in- dividual time-use and well-being. Contrary to previous research, we find no health impact when television consumption increases. For life satisfaction, we even find positive effects. Additional data support the notion that television is not an economic bad and that non-experimental evidence seems to be driven by negative selection. The second essay "Vaccines at Work", which is joint work with Roberto Mosquera and Adrian Chadi, is investigating the causes and consequences of vaccination. Influenza vaccination could be a cost-effective way to reduce costs in terms of human lives and productivity losses, but low take-up rates and vaccination unintentionally causing moral hazard may decrease its benefits. We ran a natural field experiment in cooperation with a bank in Ecuador, where we experimentally manipulated incentives to participate in a health intervention, which allows us to determine the personal consequences of being randomly encouraged to get vaccinated using administrative firm data. In a first stage, we find strong evidence that opportunity costs and peers matter to increase vaccination demand. In the second stage, contrary to the company’s expectation, vaccination did ii not reduce sickness absence during the flu season. Getting vaccinated was ineffective with no mea- surable health externalities from coworker vaccination. We rule out meaningful individual health effects when considering several thresholds of expected vaccine effectiveness. Using a dataset of administrative records on medical diagnoses and employee surveys, we find evidence consistent with vaccination causing moral hazard, which could decrease the effectiveness of vaccination. The third essay studies "The Unintended Consequences of Health Insurance" in a universal health care system. Universal healthcare is associated with desirable health and equity outcomes and often allows individuals to purchase supplementary private health insurance. While the pur- chase of private health insurance is clearly beneficial in the absence of public insurance, it is more difficult to evaluate individual costs and benefits when baseline coverage exists for everyone. The perceived benefits of insurance and the increase in health costs due to premium payments can lead to hidden costs and unintended consequences of supplementary health insurance. To study those costs, I use a regression kink design in conjunction with a policy implemented in Australia in 2000 to overcome selection. The policy punishes agents for delaying the purchase of private health until later in life. Following the policy-guided instrumentation of insurance purchase, it appears that private health insurance does not cause moral hazard. There is a zero effect on medical expendi- tures despite evidence of adverse selection. Supplementary insurance does not change mortality or work expenses but it changes the budget. We observe an increase in student debt which is consis- tent with premium payments crowding out debt repayments. There is a loss of gross income from private health insurance which is consistent with income under-reporting to reduce expenses from premium payments. iii DEDICATION To my family, and especially my mother Christine Hoffmann who was always there when I needed her. My deep gratitude goes to Anke Konrad as a pillar of support throughout this journey. iv ACKNOWLEDGMENTS I would like to thank my advisor Ragan Petrie for her support, honest advice, and encourage- ment during my doctoral studies. I am appreciative of our insightful discussions, for her being available when needed while providing me the freedom to find my research interests. Her invi- tation to Melbourne allowed me not only to meet wonderful people in Australia but also to write the third chapter of my dissertation. I am also grateful to Marco Castillo, Jason Lindo and Laura Dague who provided valuable feedback for my research projects and ideas. I am thankful to all the participants of a plethora of conferences, seminars, and brownbags for providing valuable feedback and input for my dissertation chapters which include but are not limited to the AEA 2018-2020, SAAER 2018-2020, TExAS 2018, SEA 2017-2019, ESA 2018, Advances with Field Experiments 2018, WEAI 2019, University of California - Irvine, University of Vechta, University of Melbourne, University of Konstanz and Texas A&M University. For her patience, feedback, and discussions of my ideas, and projects - sometimes up to the point of exhaustion - I am deeply indebted to Anke Konrad. v CONTRIBUTORS AND FUNDING SOURCES Contributors This work was supported by a dissertation committee consisting of Professors Ragan Petrie (advisor), Marco Castillo and Jason Lindo of the Department of Economics and Professor Laura Dague of the Bush School of Government and Public Service. The analyses in Chapter 1 were conducted in part by Adrian Chadi of the Department of Eco- nomics at the University of Konstanz; the analyses in Chapter 2 were conducted in part by Roberto Mosquera of the Economics Department, Universidad de las Américas and Adrian Chadi of the Department of Economics at the University of Konstanz. All other work conducted for the dissertation was completed by the student independently. Funding Sources Graduate study was partially supported by a fellowship from the College of Liberal Arts and the Department of Economics at Texas A&M University. vi TABLE OF CONTENTS Page ABSTRACT ......................................................................................... ii DEDICATION....................................................................................... iv ACKNOWLEDGMENTS .......................................................................... v CONTRIBUTORS AND FUNDING SOURCES ................................................. vi TABLE OF CONTENTS ........................................................................... vii LIST OF FIGURES ................................................................................. ix LISTOFTABLES................................................................................... x 1. TELEVISION, HEALTH, AND HAPPINESS ................................................ 1 1.1 Introduction................................................................................ 1 1.2 Background................................................................................ 8 1.3 Data........................................................................................ 14 1.3.1 TV Signals ........................................................................ 14 1.3.2 SOEP .............................................................................. 16 1.3.3 EVS and Own Survey ............................................................ 20 1.4 Reproducing Findings from the Literature ............................................... 21 1.4.1 Model ............................................................................. 21 1.4.2 Results ............................................................................ 21 1.5 Exploiting Exogenous Variation in TV Watching ....................................... 23 1.5.1 Model ............................................................................. 23 1.5.2 Time-use .......................................................................... 24 1.5.3 Main Results ...................................................................... 27 1.5.4 Discussion of Exclusion Restriction and Sensitivity Analyses ................. 29 1.5.5 Effect Heterogeneity ............................................................. 31 1.5.6 Extension of Time Period ........................................................ 33 1.5.7 Health-related Expenditures ..................................................... 36 1.6 Discussion ................................................................................. 39 1.7 Conclusion................................................................................. 41 2. VACCINES AT WORK ......................................................................... 43