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Erschienen in:

02.12.2023

Health care policy uncertainty and state-level employment

verfasst von: Nopphol Witvorapong, Chak Hung Jack Cheng

Erschienen in: Empirical Economics | Ausgabe 6/2024

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Abstract

This study investigates the effects of health care policy uncertainty (HCPU) on aggregate- and state-level employment in the USA. Using quarterly data during 1985Q1–2021Q4, we estimate a structural vector autoregressive model and find that HCPU has adverse effects on both aggregate- and state-level employment. The effects at the state level are heterogeneous in terms of both the magnitude and the impact persistence, lasting up to 5 quarters. The heterogeneity can be explained by state-specific structural factors, most notably the right-to-work legislation. The study suggests that uncertainty in health care policies has an economic cost that may be partially preventable.

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2
In this paper, since we are interested in identifying the effects of a health care policy uncertainty (HCPU) shock on aggregate- and state-level employment and hypothesize that HCPU exerts contemporaneous effects on employment, our choice to use a structural VAR model is appropriate. A conventional unrestricted (reduced-form) VAR model explains the endogenous variables primarily through their historical values and does not account for contemporaneous correlations among the variables. A structural VAR model, on the other hand, accommodates the imposition of recursive restrictions and the identification of structural shocks through such restrictions, decomposing the contemporaneous correlations into orthogonal components. Using a structural VAR model therefore helps us understand how structural shocks (e.g., HCPU shocks) affect variables in the model through impulse response functions.
 
3
In this study, we estimate separate VAR models for the states. An alternative is to estimate a panel VAR model that includes the employment level of all 50 states, necessitating the estimation of more than 100 coefficients, when the VAR model has 2 lags. As pointed out by Canova and Ciccarelli (2013), the heavy parameterization required of panel VAR models could reduce the degrees of freedom and lead to reduced forecasting accuracy.
 
4
Modified MATLAB codes of Schmitt-Grohé and Uribe (2018) are used to estimate the VAR model.
 
5
The macroeconomic uncertainty index and the financial uncertainty index are retrieved from the following website: https://​www.​sydneyludvigson.​com/​macro-and-financial-uncertainty-indexes.
 
6
The choice of the Poisson model is justifiable. Given that the dependent variable is a count variable, is not normally distributed and is not overdispersed (mean = 1.24; SD = 1.04), the Poisson model is preferable to its alternatives, including OLS and negative binomial. Also, the ordinary Poisson model outperforms its zero-inflated variant. In light of the fact that 22% of the observations show zero impact persistence, we run a zero-inflated Poisson model and include the two explanatory variables that are statistically significant in the ordinary Poisson model (see Table 4) in the first part of the model that predicts excess zeros. We find that both the Akaike information criterion (AIC) and the Bayesian information criterion (BIC) values from the zero-inflated model (AIC = 141.74; BIC = 178.07) are higher than those from the ordinary model (AIC = 135.74; BIC = 166.33). This indicates that the ordinary Poisson model provides a better fit.
 
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Metadaten
Titel
Health care policy uncertainty and state-level employment
verfasst von
Nopphol Witvorapong
Chak Hung Jack Cheng
Publikationsdatum
02.12.2023
Verlag
Springer Berlin Heidelberg
Erschienen in
Empirical Economics / Ausgabe 6/2024
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI
https://doi.org/10.1007/s00181-023-02532-5

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