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Health Economics

ECO 4190

Assignment 1

1. Read: Ewijk, (2011), “Long-term health effects on the next generation

of Ramadan fasting during pregnancy”

https://www.sciencedirect.com/science/article/pii/S0167629611001081

a.  Briefly, explain what is meant by the Fetal Origins Hypothesis. (2 marks)

b.  For results presented in Table 1, describe the dependent variable used. (1 marks)

c.  Describe the key independent variable. Is it exogenous? Explain/justify. (2.5 marks)

d.  Consider equation 1. What kind of age/health profile is estimated?   (Hint: not linear!)  Provide an expression for the effect of age on      health in general, and provide the precise way to estimate the effect age on health for a 20 year old and a 50 year old. (2.5 marks)

e.  In equation1, it is assumed that the age/health profile is the same for men and women. Suppose you were interested in                   understanding whether this assumption was true. Propose, with   estimating equations, two ways this could be done. (3 marks)

f.   What threat to exogeneity of the main independent variable do the authors consider? Explain the concern and how they address this concern. (3 marks)

g.  How does the author use sex composition to help support the       finding that fasting during Ramadan has health consequences? (2 marks)

h.  Do you think that the current COVID19 pandemic can be used to  test the Fetal Origins Hypothesis?  If yes, how? If not, why not? (3 marks)

2. Read: Biener, Cawlwy and Meyerhoefer (2019), “The medical care costs of obesity and severe obesity in youth: An instrumental

variables approach”

https://www.sciencedirect.com/science/article/pii/S0167629611001366?vi a%3Dihub

a.  Explain why an OLS estimate of the relationship between obesity and medical costs is likely to be biased.  Be specific and clear. (3 marks)

b.  The authors use an Instrumental Variables approach to estimate a causal relationship. Describe the instrument(s) used? (1 mark)

c.  Write out the two requirements for a valid instrument (using the variable of this paper).

i.     Is the instrument used in the paper sufficiently strong?  How can we tell? (1 mark)

ii.     How do the authors justify that the exclusion restriction is   satisfied? Are you satisfied with their argument / can you   think of a reason why the exclusion restriction might not be met? (2 marks)

d.  Summarize the key results from Table 2. Be sure to compare the OLS and IV estimates. Are the differences what you expected? (2 marks)

e.  What is a falsification test?  Explain the falsification test the authors conduct. How does it helps reinforce the validity of the main            analysis? (2 marks)

f.   This study was conducted using US data . Would you expect a  similar result if conducted using Canadian data and a Canadian context? Why/why not? Please look up and provide supporting stylized facts/statistics, properly cited of course, to support your answer. (2 marks)

Sometimes an excellent/clever instrument can be used to answer  many different research questions (same instrument , same            endogenous RHS variable, but different outcome variable). In the  paper, the authors mention that the same instrument was used in  estimate the effect of obesity on labour market outcomes (eg.        Cawley, 2004).1   Suggest a different outcome/Y variable/research  question for which the instrument you discussed in b) can be used. Briefly explain why this might be an important question to consider. (2 marks)

3.  Look up a paper online that uses IV (need not be health related).  Provide:

a.  A simple statement of the research question (1 mark)

b.  Explain the endogeneity issue that IV method addresses. (Why is IV needed and not a simple OLS?) (1 mark)

c.  Even if not provided explicitly in the paper, provide the first stage and second stage estimating equations. Please use an equation editor. (1 mark)

d.  Explain/justify the choice of instrument (does it satisfy the two conditions)? (2 mark)

e.  A proper citation for the paper. Use the referencing style used in the Beiner et al. (2019) paper above. (1 mark)