Essays on Macroeconomic

Chapter 1 analyzes life expectancy inequality. Life expectancy inequality at age 40 between high-income and low-income individuals is substantial. This paper studies the role of medical expenditures and unhealthy behaviors for the life expectancy gap. This connection is motivated by three stylized facts. First, low-income individuals spend more on health care than high-income individuals in most age periods. Second, health disparities by education are more salient as individuals age. Third, a larger fraction of high school-educated individuals engages in unhealthy behaviors. To answer how much medical services and unhealthy behaviors contribute to life expectancy inequality, I construct a life cycle model where individuals' health evolves endogenously. The model flexibly incorporates potentially correlated initial human capital and health capital. Furthermore, the model embeds unhealthy behaviors and two health systems: private health insurance and Medicare. The main findings are, i) the absence of health insurance decreases longevity only modestly on average, but dramatically for extremely low-income individuals, ii) the health condition when young has a sizable effect on life expectancy inequality, iii) the impact of unhealthy behaviors is large depending on the health condition in youth, and iv) differences in access to medical services explain a small fraction of life expectancy inequality. Hence, government should put effort into reducing health disparities when young rather than more health insurance coverage and stopping unhealthy behaviors.;Chapter 2 (co-authored with Ananth Seshadri) presents educational policy and intergenerational mobility. In the United States, there is considerable variation in intergenerational mobility across states. We argue that the distribution of public school spending across school districts under public school finance systems affects intergenerational mobility within the United States. We build a dynamic model in which school districts vote over public school spending per pupil taking the finance system as given. We embed this model with median voting at the district level within a fairly standard Ben-Porath model of human capital accumulation later in life. Our model can replicate the relationship between the distribution of public school spending and intergenerational mobility observed in data. Furthermore, three counterfactual simulations suggest that i) the correlation between parental human capital and a child's learning ability plays a significant role in explaining the cross-state variation in intergenerational mobility, ii) a more equal distribution of public school spending under a foundation program by relaxing a borrowing constraint improves intergenerational mobility, especially when a child's learning ability is not highly dependent on parental human capital, and iii) switching to a full state funding program improves intergenerational mobility, but not enormously. This is because full state funding limits public school spending, which hinders intergenerational mobility.