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The elusive wage-benefit trade-off: The case of employer-provided health insurance

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  • DeVaro, Jed
  • Maxwell, Nan L.

Abstract

This study shows that standard regressions estimated to measure a trade-off between wages and health insurance are misspecified by insufficiently accounting for establishment and firm size; an interactive, size-corrected specification is more likely to reveal a trade-off. Furthermore, because insurance decisions are typically made by firms, and wages set by establishments, the insurance constraint on establishments in multi-establishment firms weakens the trade-off. We use model-generated data to show that both factors contribute to the failure in previous research to identify a trade-off, and data from a cross section of Northern Californian establishments to test for a trade-off in multi-establishment and single-establishment firms.

Suggested Citation

  • DeVaro, Jed & Maxwell, Nan L., 2014. "The elusive wage-benefit trade-off: The case of employer-provided health insurance," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 23-37.
    • Handle: RePEc:eee:indorg:v:37:y:2014:i:c:p:23-37
    DOI: 10.1016/j.ijindorg.2014.07.004
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    More about this item

    Keywords

    Employer-provided health insurance; Wage-benefit trade-off;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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