Essays on household income and expenditures

This dissertation studies household income and consumption. In the first chapter, I identify the causal effect of retirement on health service utilization in China. In the second chapter, I investigates the impact that retirement has on the family support network of “sandwich” generations in China. In the third chapter, I propose a new estimator for linear quantile regression models with generated regressors, and apply it to study Engel curves for various commodity consumption for families in the UK.

In the first chapter, I apply a regression discontinuity design by exploiting the exogenous mandatory retirement age rules in China in order to identify the causal effect of retirement on health service utilization. In China, the social insurance Urban Employee Basic Medical Insurance (UEBMI) provision continues after individuals retire. Employees, however, stop paying the premium and enjoy reduced cost sharing after they retire. Individual medical expenses, insurance costs, and benefits are recorded in the China Household Finance Survey 2013 (CHFS). Significantly, males and females respond differently to this decrease in the relative price of health insurance at the time of retirement. Females are generally more willing to increase their out-of-pocket expenditures in order to take advantage of better health insurance benefits and utilize more medical care. Males, by contrast, do not respond to this change in relative price in the same manner.

In the second chapter, I investigates the impact that retirement has on the family support networks of “sandwich” generations in China. These middle-aged households have an inter-generational support network that includes both upward transfers (their parents or parents-in-law), as well as downward transfers (their children). I use micro data from CHARLS (China Health and Retirement Longitudinal Study) concerning middle-aged and elderly households in order to evaluate the changes that retirement can have on this family support network, primarily by exploiting the exogenous mandatory retirement age rules in China. I make the identifying assumption that inter-generational transfers would evolve more smoothly if households would not retire and apply a regression discontinuity approach. I find that retirement induces “sandwich” generations to switch roles in the private network as well as in the public transfer channel; indeed, is 55 percentage point more likely that households will switch from resource providers to resource recipients in the channel of private transfers. In addition, these “sandwich” generations are about 47 percentage point more likely to receive money from their non-coresident children when they retire.

In the third chapter, we studies estimation and inference for linear quantile regression models with generated regressors. We suggest a practical two-step estimation procedure, where the generated regressors are computed in the first step. The asymptotic properties of the two-step estimator, namely, consistency and asymptotic normality are established. We show that the asymptotic variance-covariance matrix needs to be adjusted to account for the first-step estimation error. We propose a general estimator for the asymptotic variance-covariance, establish its consistency, and develop testing procedures for linear hypotheses in these models. Monte Carlo simulations to evaluate the finite-sample performance of the estimation and inference procedures are provided. Finally, we apply the proposed methods to study Engel curves for various commodities using data from the UK Family Expenditure Survey. We document strong heterogeneity in the estimated Engel curves along the conditional distribution of the budget share of each commodity. The empirical application also emphasizes that correctly estimating confidence intervals for the estimated Engel curves by the proposed estimator is of importance for inference.