Excellent Tim Taylor on the new plasma donation paper:
John M Dooley and Emily A Gallagher take a different approach in “Blood Money: Selling Plasma to Avoid High-Interest Debt” (Review of Economic Studies, forthcoming, published online May2, 2024; SSRN working paper version here). They investigate how the opening of a blood plasma center in a certain area affects the income of low-income people. As background, they write:
“Plasma, which is part of the blood, is an important ingredient in medicines that treat millions of people for immune system diseases and other diseases. At more than $26 billion in annual value by 2021, plasma represents the world’s largest consumer electronics market. The US supplies 70% of the world’s plasma, placing blood products consistently in the country’s top ten export sectors. The US produces this level of plasma because, unlike many other countries, the US allows pharmaceutical companies to compensate donors – usually around $50 per donation for new donors, with rates as high as $200 per donation during times of severe shortages. The US also allows relatively high donation frequencies: up to twice a week (or 104 times a year)…”
Not surprisingly, plasma donors tend to be young and poor and use plasma donation to clear non-bank debt such as payday loans.
I’m intrigued by Tim’s thoughts on how this fits into labor markets and regulation:
…I find myself thinking about the financial stress many Americans face. Getting paid a few hundred dollars for a series of plasma donations is not the right answer. And it doesn’t take short-term loans with high interest rates; Indeed, borrowing money may be a bad idea if you don’t expect to have the income to pay it back. In the modern US economy, hiring a person or temporary work involves departments of human resources, paperwork, identification, bookkeeping, and tax records. These laws have their reasons, but the result is that finding part-time work that pays for a few days of work is not easy, although many urban areas have an underground network of such jobs.
Roger Miller’s 1964 classic, “King of the Road,” tells us that “two hours of pushin’ broom/ Buys a room eight and twelve four beats.” Even after allowing for some love of the hobo life in that song, the idea that a low-income person could walk out the door and get a two-hour job that pays enough to solve immediate cash problems—without donating plasma—seems almost impossible in today’s economy.
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