The Benefits to Taxpayers from Increases in Students - RAND ...

Analytic Approach 21
tion of educational attainment, age, and individual characteristics. The SIPP does not
distinguish between Medicare A and B benefits. However, “Almost all persons entitled
to HI [Part A] choose to enroll in SMI [Part B]” (Social Security Administration, July
2004). Because the SIPP does not include institutionalized persons, it does not include
Medicaid beneficiaries in long-term care.
In the second stage, for those who have used either program, we model hospitalization
(i.e., use of inpatient services) as a function of education level, age, and individual
characteristics.
The SIPP does not indicate the amount of Medicare or Medicaid spending on
a respondent. We assume that cost per participant is independent of the participant’s
education level. We use 2002 average payment per beneficiary for inpatient and outpatient
services program benefit data from the Centers for Medicare and Medicaid
Services of the U.S. Department of Health and Human Services.
Finally, the SIPP does not provide data on Part B premiums. However, premiums
are paid regardless of subsequent program utilization, so there is no reason to believe
that reductions in utilization related to increased education will be partially offset by
reductions in premiums.
Here, too, we run separate models for men and women.
The limits on participation in social support programs were generally introduced
well before 2002, when the SIPP data were collected, so their effects are reflected in
the data. Hence, our estimates of program participation implicitly take account of the
effects of these limits on program participation.
Finally, an increase in a student’s education reduces the likelihood that he or she
will participate in social support programs and, consequently, reduces the administrative
costs of social support programs. Because these savings are small relative to the
savings on payments to participants that result from reductions in participation in
social support programs, we do not attempt to estimate the savings on administrative
costs that taxpayers realize when increases in education reduce social support program
participation.
Incarceration Costs
A person with more education is less likely to be unemployed; everything else constant,
an individual with a legitimate job is better able to support him- or herself, is less likely
to resort to crime, and, consequently, is less likely to be incarcerated. Also, increased
educational attainment raises the wage that the person commands in the labor market.
This, in turn, raises the costs of crime for the individual in several ways. Incarceration
means lost time and lost wages from legal activities, as well as a severe reduction in
employment following the correctional period. Indeed, there is substantial empirical