The Impact of Public Assistance on Age at Onset of Adverse Health Conditions: A Latent Variable Approach to Control for Family Background
*Names in bold indicate Presenter
The model includes three equations (a discrete-time onset hazard, public assistance benefits, and non-benefit income) linked by a common latent variable reflecting unmeasured heterogeneity in family background. We estimate the model by maximum likelihood, estimating each equation conditional on the latent random effect, which is integrated out numerically. The model exploits state and time variation in benefits (by family size) to get exogenous variation in benefits, conditioning on non-benefit income. Preliminary results indicate that ignoring family background heterogeneity and assuming exogenous income and benefit sometimes results in insignificant impacts of public assistance on onset hazards, or even spurious positive impacts, speeding the onset of disease. In models where we allow and control for endogeneity of benefits in the hazard, we find that income and benefit income have significant impacts in postponing the onset of adverse health conditions.