Essays on Applied Public Economics

This thesis consists of three empirical papers on various topics, which are brought together under a broad umbrella of Applied Public Economics. The first paper uncovers causal links between cocaine seizures and cocaine-related hospital admissions in Italian provinces by resorting to instrumental variables approach. and explores spatial interrelations between the variables of interest via the SLX model. According to the results, ignoring endogeneity leads to underestimating the effect of seizures on consumption, while spatial relations between seizures in key entry points and consumption in the rest of the country and between seizures in adjacent provinces and consumption in a home province are found to be significant. The second paper exploits a fertility-incentivizing reform that took place in Russia in 2007 to study its effects on eligible households’ consumption expenditure patterns, treating becoming eligible for the assistance as a positive wealth shock; therefore, the paper is testing several theoretical predictions of the wealth effects literature in a setting of a developing country. Results indicate the presence of liquidity constraints, as well as households consuming from wealth to smoothen consumption trajectories. The third paper investigates causal links between problem drinking and depression by adopting a dynamic bivariate probit model, using Russian individual-level panel data. According to the results, there is evidence of bidirectional causality between the two variables, although there are significant differences along the gender dimension: the impact of depression on alcohol abuse is present only in the female subpopulation. In addition, state dependence of alcohol abuse is higher among males. The study also provides estimates of potential effects of alcohol prices doubling on both depression and alcohol abuse: male alcohol abusers are found to be price-insensitive, whereas depression prevalence among females would decrease as a result of higher alcohol prices due to a lower probability of alcohol abuse.