Maxim Pinkovskiy

Papers

Job Market Paper

The Impact of Managed Care Backlash on Health Care Costs
During the late 1990s, there was a substantial cultural, media and legal backlash against the cost-containment practices of managed care organizations (particularly, HMOs). Most states passed a variety of laws in this period that restricted the cost-cutting measures that managed care firms could use. I exploit panel variation in the passage of these regulations across states and over time to investigate the effects of the managed care backlash, as proxied by this legislation, on health care cost growth. I find that the backlash had a strong effect on health care costs, and can statistically explain much of the rise in health spending as a share of U.S. GDP between 1993 and 2005 (amounting to 1% - 1.5% of GDP). I also investigate the effects of the managed care backlash on intensity of care, hospital salaries and technology adoption. I conclude that managed care was largely successful in keeping health care costs on a sustainable path relative to the size of the economy.

Publications

World Welfare is Rising: Estimation Using Nonparametric Bounds on Welfare Measures
Journal of Public Economics, 97 no.1: 176-195, January 2013
I take a new approach to measuring world inequality and welfare over time by constructing robust bounds for these series instead of imposing parametric assumptions to compute point estimates. I derive sharp bounds on the Atkinson inequality index that are valid for any underlying distribution of income conditional on given fractile shares and Gini coefficient. While the bounds are too wide to reject the hypothesis that world inequality may have risen, I show that world welfare rose unambiguously between 1970 and 2006. This conclusion is valid for alternative methods of dealing with countries and years with missing surveys, alternative survey harmonization procedures, alternative GDP series, or if the inequality surveys used systematically underreport the income of the very rich, or suffer from nonresponse bias.

Rational Inattention and Choice under Risk: Explaining Violations of Expected Utility Through a Shannon Entropy Formulation of the Costs of Rationality
Atlantic Economic Journal 37, no. 1: 99-112, May 2009 (Winner of International Atlantic Economic Society EconSources.com Best Undergraduate Paper Competition)
We propose a model of stochastic choice in which the error term is derived from a maximizing framework in which it is costly for agents to make decisions optimally. We argue that the model has testable implications, and is closely related to other models used in the literature on choice under risk. We test this model over experimental data, replicate some conclusions of the existing literature, and show our model to perform well against models in the field in current use.

Completed Working Papers

Economic Discontinuities at Borders: Evidence from Satellite Data on Lights at Night (05/20/2013)
Using a new methodology for the computation of standard errors in a regression discontinuity design with infill asymptotics, I document the existence of discontinuities in the levels and growth of the amount of satellite-recorded light per capita across national borders. Both the amount of lights per capita and its growth rate are shown to increase discontinuously upon crossing a border from a poorer (or lower-growing) into a richer (or higher-growing) country. I argue that these discontinuities form lower bounds for discontinuities in economic activity across borders, which suggest the importance of national-level variables such as institutions and culture relative to local-level variables such as geography for the determination of income and growth. I find that institutions of private property are helpful in explaining differences in growth between two countries at the border, while contracting institutions, local and national levels of public goods, as well as education and cultural variables, are not.

Voter Learning in Primary Elections with Shigeo Hirano, Gabriel Lenz and James Snyder.
Revise and Resubmit, American Journal of Political Science
Using both existing polling data and data collected from our own internet survey, we find evidence that voters learn about the ideologies of candidates during statewide primary election campaigns and this learning affects their voting decisions. We also find evidence that voters are more likely to learn when a substantial ideological gap exists or when they have incorrect beliefs or low information about the candidates' ideologies at the start of the campaign. We find this effect only for open seat senate and gubernatorial races and not for down-ballot races or races with an incumbent.

African Poverty is Falling...Much Faster than You Think! with Xavier Sala-i-Martin. NBER Working Paper #15775
Revise and Resubmit, Journal of Economic Growth
We estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic.

Parametric Estimations of the World Distribution of Income with Xavier Sala-i-Martin, NBER Working Paper #15433
We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate global and regional poverty rates, counts, income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% between 1970 and 2006. Correspondingly, the total number of poor has fallen by 617 million people over this period. Our estimates of global count in 2006 are much smaller than found by other researchers. We find that various measures of global inequality have declined substantially and measures of global welfare increased significantly. Finally, we show that our results are robust to sensitivity tests involving functional forms, data sources for the largest countries, methods of interpolating and extrapolating missing data, and possible sources of survey misreporting.

Research in Progress

A Nonlinear Least Squares Approach to Estimating Fixed Effects Panel Data Models with Lagged Dependent Variables with Jerry Hausman.
Traditionally, fixed effects panel data models with lagged dependent variables have been estimated by instrumental variables methods, which are known to be biased especially when the dependent variable is persistent (Hausman, Hall and Kuersteiner 2007). We seek to overcome this problem by positing an estimator of the classical dynamic panel data model with fixed effects that is based on recursively substituting out the lagged dependent variable and solving the resulting equation by nonlinear least squares. Preliminary results suggest that our estimator yields superior performance in the case of high persistence of the dependent variable. We also provide versions of our estimator that are valid when regressors are predetermined rather than strictly exogenous.

Leaving Democracy: A Path Dependent Model of Regime Transitions
A surprising feature of many transitions from democracy to nonrepresentative forms of government is that they occur with substantial popular support. Using a Baron-Ferejohn model of legislative bargaining over the allocation of tax revenue to public goods or personalized transfers, we show that public goods provision is increasing in the wealth of the poorest members of the electorate. Therefore, a majority of the electorate may support restricting suffrage to a rich elite to improve public goods provision, despite the distortions that such an elite may create through other policies. In a dynamic model of economics and politics, in which there are random shocks to the marginal value of public goods, the equilibrium outcome is path dependent, with society either consolidating democracy or voting itself into oligarchy depending on the ordered sequence of public goods shocks.