Essays on Health Economics and the Economics of Social Security

Abstract: Liquidity Effects in Healthcare Consumption: Evidence from Swedish Disability Insurance RecipientsThis paper studies the role of liquidity constraints in healthcare consumption. Combining administrative data on monthly income, liquid assets, prescription drug purchases, and healthcare utilization for the universe of Swedish disability insurance recipients, I find that liquidity-constrained individuals time prescription drug purchases to paydays and reduce prescription purchases more in response to higher prices compared to unconstrained households with similar monthly income. Moreover, the results suggest that low liquidity, but not low income in general, is associated with lower annual prescription drug expenditure and higher hospitalization rates. These results have important implications for the design of health insurance policies. If demand responses to subsidized healthcare prices can be partially attributed to positive liquidity effects, previous assessments of welfare losses associated with providing generous insurance coverage may be overestimated. Therefore, it is essential to consider the impact of liquidity constraints when evaluating the welfare effects of healthcare policies and to take into account how cash-on-hand may shape consumers' responses to changes in healthcare prices.Does it matter who cares? Formal vs. informal care of the elderlyIn this paper, we estimate the effect of subsidizing formal elderly care fees on seniors' utilization of formal care services, seniors’ health outcomes, and the labor supply of their potential caregivers: their children. Leveraging a Swedish reform in a difference-in-differences design, we find that decreasing the fee for formal elderly care is associated with increased utilization of formal elderly care, reduced healthcare utilization among affected seniors, and increased labor supply of their children. We evaluate the welfare implications of the reform using Marginal Value of Public Funds framework. The result shows that the reform becomes self-financing six years after the implementation. This is because children remain attached to the labor market even after the death of their parent.The Long-Run Effect of Stricter Eligibility Rules in Short-Term Disability InsuranceCan duration-dependent eligibility criteria - increasing the strictness for eligibility over time - in Short-Term Disability Insurance (STDI) reduce STDI duration while improving long-run labor market outcomes? To answer this question, I leverage a reform in Sweden that introduced duration-dependent eligibility criteria for STDI. The results show that individuals who are screened out by the stricter eligibility criteria have lower labor force participation during the following four years after the STDI spell. Conversely, the probability of being dependent on unemployment insurance or being non-employed increases. Calculating the net effect on the government's budget for the STDI recipients who are screened out suggests large savings in the short run, but net losses after four years. The findings suggest that policymakers need to carefully consider the potential trade-offs between the direct short-run fiscal savings from policies aiming to shorten STDI duration and the potential long-run costs from unintended changes in labor supply and benefit substitution when designing eligibility criteria for STDI.