Working Papers

Downloadable working papers from PWBM. Links open directly to PDFs.

Working Paper Debt

United States' Federal Indebtedness and Fiscal Policy Trade-Offs

We estimate federal spending and taxes by birth-year, gender, race, and education, by interacting official budget totals with microsimulation demographics to project federal budget imbalances. Future federal spending exceeds tax receipts under current policy. The federal Fiscal Imbalance totals $162.6 trillion in present value, six-fold larger than outstanding debt held by the public. Restoring fiscal balance would require immediately and permanently either raising all federal taxes by 26.1 percent or reducing all federal spending by 33.4 percent, or some combination of the two. Holding harmless some population groups from changes, including people over age 59, increases the required adjustment rate.

Working Paper Tax Policy International

Pillar Two and the U.S.: A Policy Explainer for Navigating the Global Minimum Tax

The OECD expects countries to implement components of Pillar Two, its framework for a global minimum tax, starting in 2024. This paper provides policymakers with a comprehensive resource for navigating the Pillar Two framework. We review key components of Pillar Two and related aspects of US tax policy, including: (i) how the global minimum tax is likely to expose portions of the current US corporate tax base to new foreign taxes; (ii) potential modifications to US tax law that would increase compliance and protect US tax rights; and, (iii) the extent to which Pillar Two is likely to succeed in its policy objectives of reducing corporate profit shifting and international tax competition. The US is likely to cede tax rights to foreign jurisdictions if it does not enact new tax law. Pillar Two will likely reshape the nature of tax competition between countries, incentivizing greater use of subsidies and refundable tax credits to counteract higher statutory rates.

Working Paper Demographics Immigration

Immigration and the macroeconomy

In a general equilibrium, overlapping generations model with heterogeneous agents and stochastic labor productivity, we account for differences between immigrants and natives to investigate the macroeconomic effects of immigration to the United States. Including household labor productivity transitions jointly with legal status transitions, we model policies which change the size and composition of the immigrant population and analyze implications for government spending and tax revenues. Temporary increases in legal immigration rates lead to long term fiscal benefits, in aggregate and on a per capita basis, in part because of decreases in the old-age dependency ratio. These policies produce long lasting, multi-generational effects, as the children of new immigrants enter the workforce. A six year increase in legal immigration by 25% is predicted to lead to a 0.08% increase in per capita GDP and a 0.41% decrease in total government debt in 2032, but, by 2052, the policy increases per capita GDP by 0.30% while government debt is 1.34% lower than in the baseline. Policies which legalize unauthorized immigrants imply a trade-off between higher wages for newly-legalized workers and increased government debt through additional spending on social programs for those same immigrants. A full legalization policy leads to a 0.02% increase in government debt by 2032 and a 1.26% increase by 2052. Per capita GDP, meanwhile, is 0.01% lower than baseline in 2032 and 0.37% lower in 2052.

Working Paper Healthcare Demographics

Physician Characteristics and Treatment Modalities in Relation to Patient Satisfaction Scores in Outpatient Primary Care Practices

Background: Assessing patient experiences with healthcare and publicly reporting this information is increasingly prevalent. Patients use this data when reviewing physicians and hospital systems. Measurements of patient satisfaction are increasingly integrated into payment policies from insurance companies. Objective: This study analyzes (1) the relationship of physician characteristics and treatment modalities to patient satisfaction scores among primary care physicians and (2) the relationship of higher patient satisfaction scores to compliance with health maintenance objectives like mammography and colonoscopy. Main Measures: CAHPS survey as administered by Press Ganey for Main Line Health Care physicians in suburban Philadelphia. Survey data obtained on 115 physicians over 345 "doctor-years." Patient data identified by ICD9/10 codes linked to chief complaints of (1) upper respiratory illness (2) back pain and (3) fatigue, depression and anxiety. Treatment modalities groupings include (a) prescriptions for antibiotics (b) prescriptions for narcotics, (c) prescriptions for stimulants, (d) prescriptions for benzodiazepines, and (e) orders for radiologic imaging. Rates of colonoscopies and mammograms per provider were obtained for the year 2017. Key Results: Providers in practice for longer periods of time received higher top box scores. There is a significant difference in top box scores for female physicians years 0-3 and 4-9 when compared to male physicians in practice more than 10 years. There is a significant relationship between top box scores and the physician's rate of writing prescriptions for benzodiazepines, narcotics and stimulants. There is a positive correlation between top box score and compliance with mammography and colonoscopy screenings. Conclusions: Press Ganey top box score correlates with physician gender, years of experience, and certain treatment modalities. There is a correlation between high patient satisfaction scores and rate of mammography and colonoscopy compliance. Our results do not imply a causative relationship but may be suggestive that one exists.

Working Paper Demographics Social Security

Prospects for U.S. Labor Productivity Growth: What the Penn-Wharton Budget Model's Microsimulation Reveals

When making projections of key macroeconomic aggregates such as total output, earnings and payroll tax bases, the Social Security Trustees assume that future labor-productivity growth will continue to remain close to its historical average. The labor productivity projection derived from this assumption is applied to the projected worker population on a per-head basis to project the aforementioned variables. However, assuming labor productivity growth near its historical average implicitly assumes that all contributing factors will also grow close to their historical rates or changes in those factors total will be mutually offsetting. However, the future composition of workers by productive abilities will differ from the past, potentially causing inconsistency between projections of key macroeconomic aggregates and the underlying characteristics of the future population. One solution is to project as many of the productivity-contributing elements as possible using micro data information and organize them under an aggregate production function framework. This approach forces the budget analyst to define all productive inputs consistently with underlying demographic projections. Under such an approach, labor productivity growth is an auxiliary output consistent with micro-data-based projections of future worker populations, their attributes, macroeconomic aggregates, and projections of finances for programs such as Social Security. PWBM's microsimulation-based projection of U.S. demographic and economic features yields labor productivity growth estimates that are significantly smaller during the next few decades compared with the close-to-historical average rate of labor productivity growth assumed by the Social Security Trustees. Subtracting PWBM's average projected labor-productivity growth over the next 75 years (2018-92) from the Social Security Trustees' assumed value of 1.68 percent per year yields a difference of 26 basis points. If the effects of changes in the population's demographic attributes on labor productivity growth are excluded from PWBM's projection, the difference from the Trustees labor-productivity growth assumption equals 32 basis points.

Working Paper Healthcare

How Initial Conditions Can Have Permanent Effects: The Case of the Affordable Care Act

We document that states that experienced website glitches in the ACA's first year faced higher average costs that persisted into future years. These dynamics are inconsistent with the standard strategic-pricing model, which requires non-localized common knowledge about market conditions, but are consistent with price-taking. Initial conditions can have a permanent effect—including convergence to a Pareto-dominated, stable equilibrium—under conditions that we show are plausible in this setting. Changing the fine from a fixed amount to a fraction of equilibrium prices increases the likelihood of reaching a Pareto-efficient equilibrium without increasing the equilibrium fine collected.

Working Paper Tax Policy

Tax Based Switching of Business Income

Discussions of genuine tax reform often focus upon broadening the individual and corporate tax bases and lowering tax rates. These discussions also tend to assume that reform will be "revenue neutral", meaning that the new tax structure would generate the same receipts for the government as the old structure. Because firms can currently either incorporate or operate as a pass-through entity, one question that results from these discussions is how firms will react to the relative change in the corporate and non-corporate tax rates. Our results suggest that a 10 percent reduction in the tax wedge between the net corporate and individual tax rate will result in a 0.5 to 0.9 percent increase in the share of positive business income accruing to corporations.

Working Paper Demographics Tax Policy

Matching IRS Statistics of Income Tax Filer Returns with PWBM Simulator Micro-Data Output

The PWBM Simulator implements micro-level projections of individuals and families in the United States to observed trends and interactions among many demographic and economic variables. Historical estimates and projections are rigorously validated using many sources of micro-data information in the United States. Using PWBM-Simulator output to implement tax policy analysis requires mapping its distributions of individuals and families into distributions of tax filing units with appropriate income elements calibrated to observed features of U.S. tax filers. This paper described the procedures used for augmenting PWBM Simulator's micro projections with tax variables from the IRS's public use tax-return samples –the Statistics of Income surveys.