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CURRENT ISSUES IN HEALTH ECONOMICS
CONTRIBUTIONS
TO
ECONOMIC ANALYSIS

290

Editors:
B.H. BALTAGI
E. SADKA

United Kingdom – North America – Japan


India – Malaysia – China
CURRENT ISSUES IN HEALTH
ECONOMICS

DANIEL SLOTTJE
Department of Economics, Southern Methodist University,
Dallas, TX, USA

RUSTY TCHERNIS
Department of Economics, Georgia State University,
Atlanta, GA, USA

United Kingdom – North America – Japan


India – Malaysia – China
Emerald Group Publishing Limited
Howard House, Wagon Lane, Bingley BD16 1WA, UK

First edition 2010

Copyright r 2010 Emerald Group Publishing Limited

Reprints and permission service


Contact: [email protected]

No part of this book may be reproduced, stored in a retrieval system, transmitted in any
form or by any means electronic, mechanical, photocopying, recording or otherwise
without either the prior written permission of the publisher or a licence permitting
restricted copying issued in the UK by The Copyright Licensing Agency and in the USA
by The Copyright Clearance Center. No responsibility is accepted for the accuracy of
information contained in the text, illustrations or advertisements. The opinions expressed
in these chapters are not necessarily those of the Editor or the publisher.

British Library Cataloguing in Publication Data


A catalogue record for this book is available from the British Library

ISBN: 978-0-85724-155-9
ISSN: 0573-8555 (Series)

Emerald Group Publishing


Limited, Howard House,
Environmental Management
System has been certified by
ISOQAR to ISO 14001:2004
standards

Awarded in recognition of
Emerald’s production
department’s adherence to
quality systems and processes
when preparing scholarly
journals for print
Contents
List of Contributors xi

Introduction xiii

CHAPTER 1 SCHOOL POLICIES AND CHILDREN’S


OBESITY 1
Patricia M. Anderson, Kristin F. Butcher and
Diane Whitmore Schanzenbach
1. Introduction 1
2. The food environment 2
3. The activity environment 5
4. Other school policies with possible effects on student weight 6
5. Being in school versus not being in school 8
6. Policy simulations 9
7. Conclusions 13
References 13

CHAPTER 2 ALCOHOL POLICIES AND CHILD


MALTREATMENT 17
Sara Markowitz, Michael Grossman and
Ryan Conrad
1. Introduction 17
2. Analytical framework 20
3. Data 21
3.1. Alcohol regulations 23
4. Empirical estimation 25
5. Results 29
6. Conclusions 30
Acknowledgments 31
References 31
Appendix A. State liquor sales status 35
vi Contents

CHAPTER 3 CHILD CARE CHOICES AND CHILDHOOD


OBESITY 37
Resul Cesur, Chris M. Herbst and Erdal Tekin
1. Introduction 38
2. Empirical specification 42
3. Data 44
4. Results 47
5. Conclusion 58
References 58
Appendix 61

CHAPTER 4 INDIVIDUAL TIME PREFERENCES AND


HEALTH BEHAVIORS, WITH AN
APPLICATION TO HEALTH INSURANCE 63
W. David Bradford and James F. Burgess, Jr.
1. Introduction 64
2. Background 65
2.1. Foundations of time preferences 65
2.2. Measuring time preferences 68
2.3. Dynamic questions in time preferences 70
2.4. Time preferences and health 70
3. Discounting and health insurance choice 73
3.1. Conceptual model of health insurance demand 73
3.2. Discounting and health insurance choice 75
3.3. Discounting and health insurance choice results 82
4. Summary 90
Acknowledgment 91
References 91

CHAPTER 5 DISPARATE EFFECTS OF CHIP


PREMIUMS ON DISENROLLMENT
FOR MINORITIES 95
James Marton, Cynthia S. Searcy and
Jennifer Ghandhi
1. Introduction 96
2. Background 97
3. KCHIP program and data 99
4. Methods 102
5. Results 103
5.1. Main effects of the policy indicators 103
5.2. Main effects of the demographic indicators 105
5.3. Differential impact of the new premium on
minorities 106
Contents vii

6. Discussion 109
Acknowledgment 111
References 111

CHAPTER 6 HEALTH OUTCOMES FROM HEAD START


PARTICIPATION 115
Carolina C. Felix and David E. Frisvold
1. Introduction 116
2. Conceptual framework 116
3. Small, high-quality preschool programs 117
4. The Head Start program 119
5. An analysis of the influence of Head Start participation on
risky behaviors in adolescence 123
5.1. Data 123
5.2. What are the determinants of Head Start participation? 125
5.3. Selection on observables 129
5.4. Selection on unobservables 131
6. Conclusion 133
Acknowledgment 134
References 134

CHAPTER 7 UNIVERSAL HELMET LAWS AND


MOTORCYCLE FATALITIES: A
LONGITUDINAL ANALYSIS OF
POLICY CHANGES 139
Michael T. French, Gulcin Gumus and
Jenny F. Homer
1. Introduction 140
2. Background 144
3. Data and methods 146
4. Results 149
5. Conclusions 157
Acknowledgments 159
References 159
Appendix A. Variable definitions and sources 162

CHAPTER 8 ACCOUNTING FOR RACIAL/ETHNIC


DISPARITIES IN CHILDREN’S OBESITY
STATUS AT 2 YEARS OF AGE 163
Jason M. Fletcher
1. Introduction 164
2. Literature review 164
3. Data and empirical methods 167
viii Contents

4. Results 168
5. Discussion 171
Acknowledgments 174
References 174
Appendix A 177

CHAPTER 9 EFFECTS OF EDUCATION ON ADULT


HEALTH IN SWEDEN: RESULTS
FROM A NATURAL EXPERIMENT 179
Jasmina Spasojević
1. Introduction 180
2. Conceptual framework 181
3. Model 183
4. The Swedish natural experiment: compulsory
schooling reform 184
5. Data 185
6. Empirical results 186
6.1. Effect of the compulsory schooling reform on
education 187
6.2. Treatment of education in the health structural
equation 189
6.3. Treatment of income 194
7. Conclusion 196
Acknowledgments 196
References 196

CHAPTER 10 A SURVEY ON THE ECONOMICS


OF THE U.S. PHARMACEUTICAL
INDUSTRY 201
Ian McCarthy
1. Introduction 202
2. Product life cycle 203
2.1. Research and development 203
2.2. Marketing 206
2.3. Supply chain 211
2.4. Prescription drug sales and profitability 212
3. Prescription drug prices 213
3.1. Defining price 213
3.2. Trends in prescription drug prices 215
3.3. Determinants of price 217
4. Consumer behavior in the pharmaceutical industry 221
4.1. Prescription drug utilization 222
4.2. Demand elasticity 223
4.3. Physicians 224
Contents ix

4.4. Consumer information 225


4.5. Insurance coverage 226
5. Conclusion 235
References 236

CHAPTER 11 THE INDIRECT IMPACTS OF SMOKING


BANS IN GAMING VENUES 243
Joseph G. Hirschberg and Jeanette N. Lye
1. Introduction 243
2. Electronic gaming machines 245
3. The relationship between gambling and smoking 246
4. Smoking bans – a review of previous literature 248
5. Smoking ban in Victoria, Australia 249
5.1. The local impacts of the smoking ban 249
5.2. The tax revenue impacts of the smoking ban 253
6. Conclusions 255
References 256
List of Contributors
Patricia M. Anderson Department of Economics, Dartmouth College,
Hanover, NH, USA
W. David Bradford Department of Public Administration and Policy,
University of Georgia, Athens, GA, USA
James F. Burgess, Jr. Department of Health Policy & Management,
Boston University School of Public Health,
Boston, MA, USA
Kristin F. Butcher Department of Economics, Wellesley College,
Wellesley, MA, USA
Resul Cesur Department of Economics, Andrew Young School
of Policy Studies, Georgia State University,
Atlanta, GA, USA
Ryan Conrad School of Public Health, University of California,
Los Angeles, CA, USA
Carolina C. Felix Department of Economics, Emory University,
Atlanta, GA, USA
Jason M. Fletcher Division of Health Policy, School of Public
Health, Yale University, New Haven, CT, USA
Michael T. French Department of Sociology, University of Miami,
Coral Gables, FL, USA
David E. Frisvold Department of Economics, Emory University,
Atlanta, GA, USA
Jennifer Ghandhi Harris School of Public Policy Studies, University
of Chicago, Chicago, IL, USA
Michael Grossman Ph.D. Program in Economics, City University of
New York Graduate Center and National
Bureau of Economic Research, New York,
NY, USA
Gulcin Gumus College of Business, Florida Atlantic University
and IZA, Boca Raton, FL, USA
Chris M. Herbst School of Public Affairs, Arizona State University,
Phoenix, AZ, USA
Joseph G. Hirschberg University of Melbourne, Melbourne, Victoria,
Australia
Jenny F. Homer Department of Sociology, University of Miami,
FL, USA
xii List of Contributors

Jeanette N. Lye University of Melbourne, Melbourne, Victoria,


Australia
Sara Markowitz Department of Economics, Emory University
and National Bureau of Economic Research,
Atlanta, GA, USA
James Marton Department of Economics, Andrew Young School
of Policy Studies, Georgia State University,
Atlanta, GA, USA
Ian McCarthy FTI Consulting and University of North Texas,
Dallas, TX, USA
Diane Whitmore The School of Education & Social Policy,
Schanzenbach Northwestern University, Evanston, IL, USA
Cynthia S. Searcy Department of Public Management and Policy,
Andrew Young School of Policy Studies,
Georgia State University, Atlanta, GA, USA
Jasmina Spasojevic´ Department of Economics, Trinity College,
Hartford, CT, USA
Erdal Tekin Department of Economics, Andrew Young School
of Policy Studies, Georgia State University,
Atlanta, GA, USA
Introduction

In March 2010, President Obama signed into law the most broad and
sweeping reform of health care in U.S. history. This was done at a time when
aggregate medical expenses are significantly higher than they have ever been:

Decade (number of Average annual


observations) spending (billions)

2000s (9) 1,854.3


1990s (10) 969.4
1980s (10) 413.1
1970s(10) 128.9
1960s (10) 41.5
1950s (10) 18.0
1940s (3) 8.7
1930s (1) 2.9
1920s (1) 3.6
xiv Introduction

The average aggregate medical expenditure from 2000 to 2008 was 1.85
trillion dollars per year. In addition, the medical portion of the consumer
price index (CPI) shows a higher price level of medical care than ever
before. It is unlikely that quality of care has risen at the same rate (the
medical CPI is almost eight times as high as it was in 1976), so it is very
possible that consumers are paying more for each effective unit of medical
care.

The purpose of this book is to analyze the effect of policy on national


health status and to expand the knowledge base regarding the economics of
health care. Many of the issues pertaining to health care are fundamentally
economic issues, from universal coverage and waste issues to aggregate
supply of health care professionals and the pricing of pharmaceuticals.
This book will provide, in one place, theoretical and empirical research on
a wide variety of issues in medical economics.
In Chapter 1, Dr. Patricia M. Anderson of Dartmouth College,
Dr. Kristin Butcher of Wellesley College, and Dr. Diane Schanzenbach
of the University of Chicago collaborate to state that, given the large
amount of time that children spend in school, public health policy makers
tend to focus on schools as an important battleground in the fight against
childhood obesity. The question of interest is whether the school
environment is currently a contributing factor to the increase in childhood
obesity, and whether changes in school policies could help curb the increase.
It is important to realize that fundamentally, obesity is the result of an
energy imbalance – more calories are consumed than are burned. It is
possible for the school environment to have an effect on either side of this
equation. Of interest, then, is whether being in school is beneficial or
detrimental to children’s weight outcomes overall, as well as identifying
what policies may be affecting the energy balance equation. Discussion
suggests that some school environments are worse than others – that is, that
Introduction xv

schools with lower quality lunches, more junk food, and more account-
ability pressure are likely to produce fatter children. It may still be the case,
though, that being in school is better than being out of school – it will
depend on what the alternative is.
In this chapter, Drs. Anderson, Butcher, and Schanzenbach review their
(and other’s) research on the role of school policy (and school in general)
on childhood obesity. Their aim is to synthesize this literature and provide
interpretation and context for readers new to the area of school policy and
childhood obesity. Using the simple idea of energy balance, they simulate
the impact of various policies, by making straightforward assumptions
about the changes in activity levels or caloric intake implied by each policy.
They implement a model of basal metabolic rate, and metabolic equivalent
intensities of activity, and then use the fact that an excess of 7,500 calories
adds a kilogram of weight, to simulate the potential effect of a range of
policies. Seemingly, small changes in policy may well result in noticeable
changes in the weight distribution of children.
In Chapter 2, Dr. Michael Grossman of the City University of New York
and NBER, Dr. Sara Markowitz of Emory University and NBER, and
Dr. Ryan Conrad of the City University of New York address alcohol
policies and their effect on child mistreatment. The purpose of this chapter
is to empirically estimate the propensity for alcohol-related policies to
influence rates of child abuse and neglect. The alcohol regulations of interest
include beer, wine, and liquor taxes, drunk driving laws, and areas ‘‘dry’’ for
beer. Using a national database on incidents of child abuse and neglect, they
estimate the effects of alcohol control policies in reducing child abuse
measured as the number of children with confirmed or suspected reports of
child maltreatment and the number of children who die as a result of abuse
or neglect. Results indicate that higher excise taxes on alcohol may be
effective in reducing the incidence of child maltreatment.
In Chapter 3, Dr. Resul Cesur of Georgia State University, Dr. Chris
M. Herbst of Arizona State University, and Dr. Erdal Tekin of Georgia
State University and NBER analyze the impact of child care utilization on
school-age children’s body mass index (BMI). They state that childhood
obesity rates in the United States have increased dramatically over the past
three decades. The growing use of non-parental child care has raised
awareness among health care professionals and policy makers of the
critical role that these settings play in shaping children’s eating and activity
habits. However, little empirical research focuses on the relationship
between child care utilization and children’s weight outcomes. Drawing on
rich data from the Kindergarten Cohort of the Early Childhood
Longitudinal Study (ECLS-K), this chapter makes a number of contribu-
tions to existing research in this area. First, we exploit the longitudinal data
structure in the ECLS-K to construct a multiperiod panel of children, with
information on BMI and child care attendance observed during the fall of
kindergarten and the spring of first, third, fifth, and eighth grades. Second,
xvi Introduction

they specify and estimate a fixed effects quantile regression (FEQR) model
that both differences out time-invariant unobserved heterogeneity and
allows them to address the possibility that non-parental care has hetero-
geneous effects on children’s weight at different points in the BMI
distribution. Finally, they consider different parameterizations of child
care utilization, including participation in various modes of child care as
well as measures of the intensity of participation (e.g., hours).
In Chapter 4, Dr. W. David Bradford of the University of Georgia
observes that time preferences are considered a fundamental characteristic of
economic behavior. Dynamic models of utility maximization have strong
predictions about the effects of different rates of discounting on individual
behavior. In general, we expect that higher rates of discounting lead an
individual to more strongly shift consumption of economic goods to the
present and economic bads to the future, relative to a person with lower
rates of preference for the present. While time preferences are clearly a
fundamental of economic behavior, economists devote surprisingly little
attention to understanding their origins. Some of the earliest modern
theoretical work on the subject was conducted by Paul Samuelson. He
proposed a discount factor that indicates a strength of preference for the
present over the future. For several decades after Samuelson’s work, his
model of discounted utility was the standard conceptual basis for economists’
understanding of intertemporal choice. Since this time, some – though by no
means a great deal of – additional research has been conducted to explore
what factors might contribute to the individual’s level of discounting. Becker
and Mulligan propose a theoretical model of how individuals’ time
preferences change. This research has direct implications for the expected
relationships between (1) important choices a person makes/constraints a
person faces and (2) the strength of their discounting of the future.
While some progress has been made in understanding how time
preferences might be endogenized, and substantial effort has been devoted
to exploring the impact of time preferences on many aspects of economic
life, surprisingly little attention has been paid to the effect of time
preferences on health and health care – despite the fact that many aspects
of health care reflect strongly time-dependent choices. Individual rates of
discounting may affect many aspects of health choice. Conceptual models
of optimal insurance design often explicitly incorporate individual time
preferences (through the introduction of a discount rate) and implicitly
incorporate risk preferences (through the shape of the instantaneous utility
function being maximized). Empirically, however, relatively little is known
about how individual-level time and risk preferences affect selection of
insurance types with varying degrees of riskiness and expected future net
medical costs. This chapter presents a survey of what is known about the
role of time preferences in health-related choices, ranging from risky
behaviors (smoking and illicit drug use), to preventative health care, to
insurance choice. In addition, original research is presented on health care
Introduction xvii

and health insurance effects of discounting. Finally, the chapter highlights


promising areas for future research.
In Chapter 5, Dr. James Marton of Georgia State University,
Dr. Cynthia S. Searcy of Georgia State University, and Dr. Jennifer
Ghandhi of the University of Alabama question if certain types of children
are differentially affected by children’s health insurance premiums.
Concern over the presence of inequity within the State Children’s Health
Insurance Program (SCHIP) has motivated studies involving demographic
characteristics of SCHIP enrollees, particularly racial disparities among
children enrolled in the program. Minority children are more likely to
disenroll from SCHIP than their white counterparts, but it is unclear
whether these children leave public coverage altogether or whether they
simply move into other categories of public coverage. Some worry that
increases in cost sharing might worsen racial inequity within SCHIP. Our
purpose is to examine the differential short-run effects on children based
on sociodemographic characteristics after the introduction of a $20
monthly family premium in Kentucky’s SCHIP (KCHIP 3) in late 2003.
Drs. Marton and Ghandhi employ a competing risks model (Marton et al.,
2009) in order to differentiate between exits to other forms of public
coverage and exits to no public coverage. The original model shows that
non-white children were 32% more likely to exit within each of the first
three months after the premium increase than white children (po0.01). The
competing hazard model allows them to see that non-white children were
52% more likely to exit public coverage than their white counterparts
(po0.01). The implication is that minority children are more likely to
become uninsured than white children, suggesting that the policy change
adversely affects non-whites.
In Chapter 6, Carolina C. Felix and Dr. David E. Frisvold of Emory
University looks at early childhood education as an investment in health.
He states that there is a growing body of evidence that suggests that early
childhood socioeconomic conditions have lasting economic consequences,
reinforcing and sustaining disparities in health and education. Head Start
is the principal federally funded program through which the United States
invests directly in the human capital of disadvantaged preschool children.
This chapter focuses on whether participation in the Head Start program
influences health behaviors, including smoking and drug use, in adole-
scence. To address this question, Dr. Frisvold begins by reviewing the
literature on the relationship between early childhood circumstances and
long-run health outcomes. Although there is an extensive body of research
on the impact of Head Start participation, there has been little research on
the impact on risky behaviors in adolescence.
The difficulty that arises in examining the effect of Head Start
participation is that selection into Head Start is the result of choices
made by parents and administrators. To examine the potential influence of
selection due to observed characteristics and selection due to unobserved
xviii Introduction

characteristics, Dr. Frisvold follows the methodology developed by Altonji


et al. (2005) to estimate the effect of Head Start participation. Their
strategy is to use the amount of observed selection as a guide for the extent
of unobserved selection. Dr. Frisvold uses this strategy to examine the
impact of Head Start participation on smoking and drug use throughout
adolescence and the extent to which varying degrees of selection on
unobservables influence this relationship. To further understand the
sources of any selection on unobservables, Dr. Frisvold gathers informa-
tion on the required admissions criteria that Head Start centers use to
determine which of the eligible children are offered admission in the center.
Head Start centers are required to admit the most disadvantaged children
using an established ranking, although the criteria used to determine who
are the most disadvantaged can vary across centers. Dr. Frisvold uses data
from Fragile Families and the Early Childhood Longitudinal Study-Birth
Cohort (ECLS-B) to attempt to narrow the bounds on the estimate of the
impact of Head Start participation.
In Chapter 7, Dr. Gulcin Gumus of Florida International University
and IZA, Dr. Jenny F. Homer of the University of Miami, and Dr. Michael
T. French discuss the impact of universal helmet laws on motorcycle riding
and safety. They observe that in 2007, 5,154 motorcyclists were killed and
approximately 103,000 were injured in the United States. Although
motorcycles accounted for only 3 percent of registered vehicles at that
time, motorcyclists were involved in 13 percent of all traffic fatalities.
Studies clearly demonstrate that universal helmet laws can reduce the
likelihood of being killed or severely injured in a crash. Nevertheless, helmet
policies vary across states. As of February 2009, 20 states had universal
helmet laws requiring all riders to wear a helmet, 27 had partial helmet laws
for some riders, and 3 did not have a helmet law.
Drs. Gumus, Homer, and French further investigate the effectiveness of
such policies by focusing on their long-term impact and their effect on
motorcycle use. Using state-level longitudinal data for 1975–2005, they
estimate how the adoption and repeal of universal helmet laws influence
motorcycle safety. In an effort to address the potential endogeneity of
adoption or repeal of helmet laws, they use a dynamic specification that
includes leads and lags of the helmet law adoptions and repeals. Their
results confirm earlier findings that adoption of universal helmet laws
prevents fatalities, whereas repeals lead to increases in fatality rates. They
also show that the effects of both adoption and repeal persist much past the
year the states enact or repeal such laws. In addition, they provide evidence
that helmet laws operate in the intended manner such that they reduce
fatalities mainly by improving safety rather than by reducing motorcycle
riding. These findings have key public health implications for states that
may be considering changes to their existing motorcycle helmet policies.
In Chapter 8, Dr. Jason M. Fletcher of Yale University attempts to
account for racial and ethnic disparities in children’s overweight status at
Introduction xix

two years of age. Dr. Fletcher observes that recent research has suggested
the presence of large racial/ethnic differences in young children. This chapter
examines whether family factors other than race/ethnicity explain these large
racial/ethnic differences in overweight status of young children. Addition-
ally, this chapter examines previously undocumented determinants of early
childhood overweight status. Dr. Fletcher uses longitudinal nationally
representative sample of children born in 2001 (ECLS-B). Participants come
from diverse socioeconomic and racial/ethnic backgrounds with over-
samples of twins, low and very low birth weight children, and minority
groups. Multivariate logistic regression analyses are used, and data are
weighted to account for the survey design of the data set.
Dr. Fletcher finds evidence that although there are large racial/ethnic
differences in the prevalence of being overweight as early as two years of age,
these differences can be accounted for by controlling for a small set of family
characteristics, including marital status and whether English is the primary
language spoken at home. This chapter also presents new findings on the
determinants of early childhood overweight status. For example, evidence
suggests that parental activities with their young children, such as playing
chasing games and walking/playing outside, are associated with lower odds
of early overweight status. Dr. Fletcher concludes that family factors other
than race/ethnicity may account for the large racial/ethnic differences in
early childhood overweight status that have been found in previous research.
Health investments in young children targeted to children from single-parent
households and from households with low English language skills may be
efficient. He also states that additional research is required to examine the
mechanisms that confer high overweight rates on children from single-family
and non-native households.
In Chapter 9, Dr. Jasmina Spasojevic discusses the results of a natural
experiment on the effects of education on adult health in Sweden.
Dr. Spasojevic states that understanding health determinants and their
mechanisms affecting health is an important social policy issue. Empirical
tests in the health literature abound with the undisputed finding that the
number of years of formal schooling completed is the most important
correlate of good health. There is less consensus as to whether this
correlation reflects a causal relationship of more schooling to better health.
This chapter capitalizes on a unique social experiment – the 1950 Swedish
comprehensive school reform that was implemented in stages and by
municipal areas. Consequently, people born between 1945 and 1955 went
through two different school systems (one of which required at least one
more year of schooling). This chapter uses the instrumental variables (IV)
technique to estimate formal schooling’s causal effect on adult health in
Sweden. The instrumental variable for degree of education (schooling)
generated from compulsory school reform yields a consistent estimate of
education’s causal impact on health as measured by an index of bad health
and of BMI in the healthy range. Dr. Spasojevic finds that the additional
xx Introduction

schooling generated by Sweden’s compulsory school reform produces


improved adult health (controlling for cohort and county effects, family
background characteristics, and individual income).
In Chapter 10, Dr. McCarthy presents a survey of the economics of the
pharmaceutical industry. With expenditures totaling $227 billion in 2007,
prescription drug purchases are a growing portion of the total medical
expenditure, and as this industry continues to grow, prescription drugs will
continue to be a critical part of the larger health care industry. In this
chapter, Dr. McCarthy focuses on the role of R&D and marketing, the
determinants (and complications) of prescription drug pricing, and various
aspects of consumer behavior specific to the pharmaceutical industry, such
as prescription drug regulation, the patient’s interaction with the physician,
and insurance coverage. This chapter also provides background in areas
not often considered in the economics literature, such as the role of
pharmacy benefit managers in prescription drug prices and the differentia-
tion between alternative measures of prescription drug prices. As is evident
from this chapter, the prescription drug industry is complex and much of
the research in this industry remains inconclusive.
In Chapter 11, the final chapter of this volume, Drs. Joe Hirschberg and
Jenny Lye of University of Melbourne discuss effects of the smoking bans
in gaming venues. The authors show that, while the effects of smoking bans
on smoking might seem obvious, other effects could be less intuitive if
smokers are more likely than non-smokers to frequent gaming venues. The
authors use data from gaming venues in Victoria, Australia, and examine
the consequences of the smoking ban on gaming expenditures and tax
revenues.
CHAPTER 1

School Policies and Children’s Obesity

Patricia M. Anderson, Kristin F. Butcher and


Diane Whitmore Schanzenbach

Abstract

Questions have arisen as to whether the school environment is currently a


contributing factor to the increase in childhood obesity, and whether changes
in school policies could help curb the increase. In this chapter, we discuss key
aspects of the literature on the role of the school food environment, and the
role of the school activity environment in effecting the caloric intake and
expenditure of children. We also simulate the effect of a range of reasonable
changes in weekly minutes spent being active in school, and changes in weekly
calories consumed in school.

Keywords: childhood obesity, school environment, school policies

JEL classifications: I10, I20

1. Introduction

Given the large amount of time that children spend in school, public health
policymakers have tended to focus on schools as an important battleground
in the fight against childhood obesity. The question of interest is whether
the school environment is currently a contributing factor to the increase in

* Corresponding author.

CONTRIBUTIONS TO ECONOMIC ANALYSIS r 2010 EMERALD GROUP PUBLISHING LIMITED


VOLUME 290 ISSN: 0573-8555 ALL RIGHTS RESERVED
DOI:10.1108/S0573-8555(2010)0000290004
2 Patricia M. Anderson, Kristin F. Butcher and Diane Whitmore Schanzenbach

childhood obesity, and whether changes in school policies could help curb
the increase. It is important to realize, though, that fundamentally obesity is
the result of an energy imbalance – more calories are consumed than are
burned. For school policies to have an impact on children’s obesity, it must
be the case that the school environment has an effect on either side of this
equation. Thus, this chapter focuses on reviewing what we know about the
role of the school food environment as well as the school activity
environment. Additionally, there may be school policies not directly meant
to impact the food or activity environment, which nonetheless do just that.
In considering the school food environment, we first review the
literature on school meals, in particular, participation in the National
School Lunch Program (NSLP) and the School Breakfast Program (SBP).
We then turn to an aspect of the food environment that has received a large
amount of attention, the availability of competitive foods, where by
competitive foods we mean foods sold outside of the school meals
programs. While the meals programs are required to meet federal nutrition
standards, competitive foods are often of the high calorie–low nutrient
type. Thus, there is much concern over the impact the availability of these
types of foods in schools may have on children’s weight.
On the other hand, schools generally provide children with opportu-
nities for activity, via physical education (PE) classes. Additionally, for the
younger children, periods of active play are often available via recess. Next,
we review the literature on the school activity environment. Following this,
we look at school policies that may inadvertently affect either the food or
activity environment. In particular, we focus on school accountability
measures. The need to increase scores in subjects tested under federal
mandates, such as mathematics and English, may result in time
reallocation away from physical activity and recess. Similarly the desire
to spend more preparing students for tests in these subjects may imply
raising funds through competitive food sales.
Finally, having reviewed the literature on school policies and obesity, we
carry out a series of policy simulations. By making straightforward assump-
tions about the changes in activity levels or caloric intake implied by a given
policy, we can implement a model of basal metabolic rate (BMR) and
metabolic equivalent (MET) intensities of activity. Using the fact that an
excess of 7,500 calories adds a kilogram of weight, we can simulate the
potential effect of a range of policies on the weight distribution of children.

2. The food environment

The NSLP serves over 30 million students every school day (USDA,
2010a). While local schools make their own decisions about exactly what
foods to serve for each meal, the meals must meet federal nutrition
requirements. Of particular note is that the lunches are expected to provide
School Policies and Children’s Obesity 3

one-third of the Recommended Dietary Allowance of calories, while


following the 1995 Dietary Guidelines for Americans (USDA, 2010a). The
SBP is about a third of the size of NSLP, and must also follow these
dietary guidelines, while providing one quarter of the Recommended
Dietary Allowance of calories (USDA, 2010b).
While these school meals programs do have a focus on nutrition,
Schanzenbach (2009) finds that children partaking of the school lunch
consume about 46 more calories compared to those bringing lunch from
home. It is perhaps not surprising then that she estimates that NSLP
participation increases the probability that a student is overweight.
Important to note is that she is controlling for weight at the start of
kindergarten, so the findings are not simply due to inherent differences in
participants and non-participants. Rather, the implication is that weight
gain while in school is larger for participants. Both of the very different
empirical approaches come to this conclusion. One takes advantage of the
fact that NSLP is heavily subsidized for students with family income less
than 185 percent of the poverty line. Thus, the incentive to be a participant
is much larger for a student at 184 percent of the poverty line versus one at
186 percent of that line, resulting in a noticeable increase in participation.
Students who are very similar in terms of family income (i.e. 186 percent
versus 184 percent), with no difference in the probability of being
overweight at the start of kindergarten, are then seen to have different
probabilities of being overweight by the end of first grade, which can
logically be attributed to the higher rate of NSLP participation. The
alternative approach focuses on only those paying full price for lunch. For
this sample, conditional on weight at the start of kindergarten and a full
range of background characteristics, NSLP participants are more likely to
be overweight by the end of first grade.
While the work of Schanzenbach is quite convincing, other studies are
less certain of the impact of NSLP on children’s obesity. For example,
Gleason and Dodd (2009) find no relationship between usual participation
and weight status when using data from the third School Nutrition Dietary
Assessment Study (SNDA-III). It is important to note, however, that the
point estimates in Gleason and Dodd are positive, although for the model
estimating the probability of being overweight only logit coefficients are
reported, so it is not possible to make a direct comparison with the point
estimates in Schanzenbach. One key difference in the Gleason and Dodd
study is that the data are for students in all grades from 1 to 12 in school
year 2004–2005, while the Schanzenbach study focused only on one cohort
of students who started kindergarten in the fall of 1998 (Early Childhood
Longitudinal Study – Kindergarten Class of 1998–1999, or ECLS-K). The
SNDA-III sample is much smaller than the ECLS-K sample, though,
which may partially be the cause of the relatively imprecise estimates. It is
also worth pointing out that when comparing 2004–2005 to 1998–1999,
fewer schools exceeded the standards for saturated fat (Gordon et al.,
4 Patricia M. Anderson, Kristin F. Butcher and Diane Whitmore Schanzenbach

2009). Thus, changes in the content of school lunches across the samples
may also play a role in the different estimates.
Gleason and Dodd (2009) also investigate the role of the SBP using the
SNDA-III data. For this program, the point estimate implies a negative
effect on the probability of being obese (although again the coefficient is
not significant), but they do estimate a significantly negative impact on
body mass index (BMI). Millimet et al. (2010) also study both NSLP and
SBP simulataneously, but using the same ECLS-K data used by
Schanzenbach. They conclude that SBP participation is likely to reduce
the likelihood that a student is overweight, but that NSLP participation is
likely to increase that likelihood. Overall, the finding that SBP is beneficial
is consistent with studies focused on the nutritional content of the
meals. For example, Bhattacharya et al. (2006) find that SBP participants
have higher blood serum levels of most key nutrients than do non-
participants.
Much of the concern about the school food environment revolves not
around the meal programs, but around the availability of competitive
foods. According to Fox et al. (2009b), 40 percent of children consumed
competitive foods on an average school day in 2004–2005. Competitive
foods, i.e. foods sold outside of the school meals programs, are often
thought of as ‘‘junk’’ food, as they include vending machine items such as
sodas, candy, and chips, as well as other snack items sold in school stores
or in a la carte lines in school cafeterias. Assumptions about the deleterious
effects of competitive foods have resulted in many school districts banning
soft drinks and vending machine items. However, it is not clear that such
bans will have the desired impact. For example, Blum et al. (2008) studied
soda consumption among Maine students after a reduction in the
availability of sodas in their schools, and found no significant reduction
compared to students whose schools did not reduce availability.
Results from studies focused directly on the effect of competitive foods
on students’ obesity are somewhat mixed. Anderson and Butcher (2006)
look at overweight rates for public school students of age 14 and over in
the National Longitudinal Study of Youth 1997 Cohort (NLSY97),
combined with competitive food availability from the School Health
Policies and Programs Survey (SHPPS). The probability that a student is
exposed to sodas or snack foods in their school is predicted based on state
and local characteristics available in both the SHPPS and NLSY97 data.
They find that for every 10 percentage point increase in the probability of
being exposed to junk food, a student’s BMI is about 1 percent higher.
Interestingly, this effect is driven entirely by students with an overweight
parent, for whom a 10 percentage point increase in exposure increases BMI
by just over 2 percent. One interpretation of this finding is that individuals
have a genetic predisposition toward weight gain when the environment is
conducive, and the availability of competitive foods in schools creates just
such an environment.
School Policies and Children’s Obesity 5

Larson and Story (2010) review the literature on competitive foods,


concluding that the general finding is one of students having better diet
quality when they are not exposed to competitive foods. At the same time,
not all studies find a consistent impact on students’ weights. For example,
Fox et al. (2009a) find that while competitive foods sold in vending
machines are associated with higher BMI, when sold in an a la carte line
they are associated with lower BMI. Also, Datar and Nicosia (2009)
conclude that there is no effect of competitive food sales on BMI. They
base their study on the fact that competitive foods become more common
at schools serving higher grade levels. Thus, a fifth grade student in a K-5
or K-6 school is less likely to be exposed than if they attended a K-8, K-12,
or 5–8 school. The grade span of the school predicts availability of
competitive foods, and higher availability increases consumption, but they
find no significant effect on BMI.
Ultimately, then, what can we say about the role of the school food
environment in children’s overweight? While the results are not unan-
imous, there are several studies with credible research designs that find a
positive effect of NSLP participation on the probability of being
overweight. At the same time, the consensus on SBP is that it does not
contribute to overweight, and may actually be protective. As with the
NSLP studies, there is no unanimity on the effect of competitive foods, but
again there are a range of convincing studies finding a positive effect on
student weight. Thus, while there remains the possibility that the school
food environment does not have any impact on children’s overweight, the
bulk of the evidence implies that there is likely to be an effect. In Section 6,
we will simulate the impact of increased caloric intake via NSLP
participation or competitive foods availability. To the extent that these
simulations predict weight effects that are in line with the estimates of the
papers finding an effect, we can consider it additional evidence for the role
of the school food environment.

3. The activity environment

There are no federal requirements for recess or PE in schools, although


many states do implement recess or PE requirements. Typically, the exact
amount of physical activity offered by a school is a local decision. The
American Heart Association (2009) reports that 3.8 percent of elementary
schools, 7.1 percent of middle schools, and just 2.1 percent of high schools
provide daily PE, with 22 percent of schools not requiring any PE.
According to Robert Wood Johnson Foundation (2009), 40 percent of
school districts have reduced or even eliminated recess, with a quarter of
elementary schools no longer having recess for all grades. While there is
good evidence of a reduction in opportunities for activity in schools, the
effect of PE and recess on student weight is less clear.
6 Patricia M. Anderson, Kristin F. Butcher and Diane Whitmore Schanzenbach

In terms of younger students, there is reasonable evidence that more


time in active play at school is associated with a lower BMI. Datar and
Sturm (2004) find that when PE and recess time increases between
kindergarten and first grade, girls who were overweight in kindergarten
had a reduction in BMI. Using the same ECLS-K data, Miras-Wilson
(2007) updates this study through the fifth grade, and finds that higher
frequency PE is associated with a lower probability of obesity for all
students. While the role of PE and recess in reducing overweight for
elementary-age children is observed in multiple studies, evidence is more
mixed for older students.
Cawley et al. (2007) approach the issue by focusing on states with a PE
requirement for high school students. While students in such states are
physically active for an additional 31 min per week, there does not appear
to be a significant impact on BMI or the probability of being overweight.
Interestingly, for boys, the requirement does not increase the number of
days with vigorous activity, but it does for girls. It may be that PE
requirements have a bigger effect on more sedentary students, so that if
boys are more likely to be active in any case, we only observe an impact on
girls. The lack of an effect on weight outcomes for either gender, though,
may be harder to explain. One possibility is that the additional PE time did
make students more fit, but since muscle weighs more than fat, an effect on
BMI was not detected. If more precise body fat measurements could be
taken, perhaps a positive effect on student health could be observed.
Another study focusing on older students (age 12–18) is Durant et al.
(2009), which finds that more days of PE per week is positively associated
with overall physical activity. However, like the Cawley et al. study,
a significant relationship with BMI is not detected.
While in theory it is clear that burning more calories than one consumes
should result in weight loss, the evidence on the role of the school activity
environment on student body weight is less clear. It may be that for
younger students recess and PE provide a true increase in activity. That is,
without the time spent in recess and PE, these students would be taking
part in sedentary classroom activities, and that the amount of school
activity has no impact on the amount of afterschool activity. In contrast,
for older students it may be the case that while PE does directly replace
sedentary classroom activities, it is also a substitute for afterschool activity,
resulting in very little net increase in activity.

4. Other school policies with possible effects on student weight

Having looked specifically at the school food and activity environments,


we now turn to school policies that do not focus on these environments,
but may nonetheless have unintended impacts on them. Foremost among
these is accountability, as seen with the federal No Child Left Behind
School Policies and Children’s Obesity 7

(NCLB) legislation, as well as some state systems. Typically, the only


outcomes that schools are required to improve upon are academic, with no
accountability for health outcomes. Given the pressures to do well on
standardized tests, schools are likely to reallocate time away from recess
and PE, and toward tested academic subjects.1 Similarly, accountability
rules may lead to financial pressures, as schools wish to spend more on test
preparation (e.g. hiring more aides, purchasing worksheets, etc.). Admin-
istrators who still hope to spend the same amounts on other budget items
as previously may now have a larger motivation to raise new funds through
outside food and beverage contracts.2 Finally, schools may use food
rewards to incentivize their students to work hard toward passing the
standardized tests. These rewards could take the form of parties with
cupcakes or other high-calorie snacks, or coupons for fast food restaurants
for exemplary performance.
Anderson et al. (2010) investigate this possibility, using data from
schools in Arkansas. They categorize a school as marginal, i.e. most likely
to respond to NCLB pressures in the manners described above, if they
came within 5 points of meeting Annual Yearly Progress (AYP) on their
NCLB tests the previous year. Schools that made AYP by more than
5 points are assumed not to feel much pressure, while those missing AYP
by more than 5 points are likely to feel that their problems are too large to
be solved by simple resource reallocations and reward schemes. Anderson
et al. (2010) find that these middle-achieving marginal schools have a
significantly higher rate of student obesity. A survey of Arkansas principals
indicates that since the passage of NCLB, schools are indeed undertaking
the types of behaviors described above that may have unintended impacts
on student weight.
Yin (2009) takes a different approach to the same question, taking
advantage of the fact that state accountability systems were implemented at
different times. Differences in exposure to state accountability can then be
used to estimate the causal impact of accountability. Using nationally
representative data from the Youth Risk Behavioral Surveillance System
(YRBSS), she finds that, in fact, exposure to accountability does increase
student BMI, and increases the probability of being obese. The approach
here is very different from the one taken by Anderson et al. (2010), and
focuses on state accountability systems, not the federal NCLB, but both
papers still find that accountability has a significant impact on body weight.

1
Center on Education Policy (2007) finds 20% of school districts have decreased recess time
since NCLB was enacted, with an average decrease of 50 min per week.
2
Anderson and Butcher (2006) find evidence that schools that are under more financial
pressure are more likely to give students access to junk food and that students in these
schools have higher BMI.
8 Patricia M. Anderson, Kristin F. Butcher and Diane Whitmore Schanzenbach

Accountability is the only school policy with unintended effects on


student weight that has been closely studied. However, it is possible that
other school policies that have yet to be studied may have similar
unintended effects. Because the effects are completely unintended, it may
not currently be clear what policies might be of concern. Overall, though,
we have seen that there are a range of policies that do affect student weight,
from the food environment, to the activity environment, to accountability,
to perhaps other policies. While it thus seems clear that some school
policies are worse for students than other school policies, what is not clear
is whether school itself is bad for student weight. We explore this issue in
the next section.

5. Being in school versus not being in school

While a range of school policies have been found to be associated with


higher levels of student obesity, being in school may still be better than not
being in school. One approach to exploring this question is to compare
student outcomes during the summer with those over the school year. For
example, using the ECLS-K, von Hippel et al. (2007) find faster growth in
BMI during the summer between kindergarten and first grade than during
the kindergarten and first grade school years. The growth rates were
especially large for Black and Hispanic children, the same groups who were
most likely to be overweight at the start of kindergarten. The possibility
that a more structured environment is helpful in preventing weight gain is
hinted at in Tovar et al. (2010). This study surveys families in Somerville,
MA, during the summer months about their children’s diet and activity
levels. They find that students spending more time in parental care are more
sedentary, while those spending more time in structured day camp settings
are more active. Diet over the summer did not appear significantly different
from nationally reported school year averages, but it was true that children
spending more time in camps were less likely to eat in front of the television.
An alternative approach to answering the question of whether it is
better to be in school or not is taken by Anderson et al. (2008). They take
advantage of the fact that most states have a date by which a child is
required to be 5 years old before starting kindergarten. Consider a cutoff
date of September 1. A student who turns 5 on August 31 will start
kindergarten right after turning 5. This student will be observed at the end
of first grade as an almost 7-year-old who has been exposed to 2 years of
school. At the same time, a student who turns 5 on September 2 will not
start kindergarten that fall. This student will be observed at the end of
kindergarten as an almost 7-year-old who has been exposed to only 1 year
of school. Given that these children were born just 2 days apart, the only
real difference in any observed outcomes can reasonably be attributed to
the difference in their school exposure.
School Policies and Children’s Obesity 9

Based on this approach, there is little evidence that being exposed to


school for an additional year is either good or bad for student weight
outcomes. Interestingly, if one had simply compared students with more
actual exposure to those with less, it would appear that more exposure was
positively related with BMI. The implication is that when families choose
to ignore the state cutoff dates, it is to hold back a smaller child or send a
larger child. This spurious effect of school on BMI disappears when using
only the variation in school exposure that comes from following the cutoff
rules. In this case, the overall point estimates are negative, but economic-
ally small. All estimates are very imprecise, though, such that none are
significantly different than zero.
The impact of school, per se, on children’s obesity remains unclear.
There is some evidence that the structured setting is preferable to the
unstructured days of summer, but at the same time there is no evidence
that a 7-year-old who has been exposed to 2 years of schooling has a
significantly lower BMI or a significantly lower probability of being
overweight than one exposed to just 1 year.

6. Policy simulations

While school exposure may not be clearly good or bad for student weight
outcomes, changes to specific policies may have an impact. In this section,
we simulate the effect of some basic policies that impact either calories
burned or calories consumed. Over the course of a school year, seemingly
small changes can have noticeable impacts. Recognizing that the only way
to affect a child’s weight is to have an imbalance between calories taken in
and calories burned, we start with a model of the BMR, the resting energy
expenditure. We chose to use equations from Schofield (1995), which were
found by Wong et al. (1996) to be similar on average to measuring BMR
by indirect calorimetry. The Schofield equations are based solely on
observed height and weight, but with separate equations for younger and
older children:
BMR ¼ 17:0 ðweight in kgÞ þ 1:6 ðheight in cmÞ þ 371 (1)
(for ages 3–10 years) and
BMR ¼ 8:4 ðweight in kgÞ þ 4:7 ðheight in cmÞ þ 200 (2)
(for ages 10–18 years).
These equations (taken from Wong et al., 1996) represent the number of
calories burned by a child of a given age, height, and weight if they did
nothing but exist.
Activity also burns calories, though, at a rate that depends on the amount
of time spent in the activity, the level of intensity, and current weight. Activity
levels can be measured as MET intensities, which can be thought of as calories
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