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Estimating the Relationship between Employer-Provided Health Insurance, Worker Mobility, and Wages

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  • Martha Harrison Stinson

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    (U.S. Census Bureau)

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    Abstract

    Two separate literatures have sought to quantify the relationship between wages and job tenure and quit decisions and employer-provided health insurance. The fundamental difficulty in both cases is the presence of unobservable person and job characteristics that are correlated with both compensation outcomes and personal mobility. This paper seeks to bring these two strands of research together by estimating a joint model of wages, hazard of a job ending, and probability of holding employer-provided health insurance and allowing for correlated person and job heterogeneity across the three equations. Using data from the 1990 and 1996 Survey of Income and Program Participation (SIPP) Panels linked to SSA administrative job histories, the model is estimable due to the presence of monthly wage, job tenure, and health insurance observations for a relatively large, nationally representative sample of people over the course of 2 1/2 and 4 years respectively. Multiple jobs per person and multiple observations per job allow the identification of the part of the variation in wages, tenure, and health insurance status due to unobservable person and job characteristics and the correlation between individual and job propensities for high wages, low mobility, and high probability of benefits. The explicit modeling of this correlation not only produces unbiased estimates of the tenure and health insurance effects, but also allows the comparison of hazard rates for high-wage jobs versus jobs with a high probability of providing health insurance. I find substantial levels of job-lock of 30%-60% and annual returns to seniority of 1.5%-2% after the first four years of a job. In addition, I find that increasing the job-specific probability of obtaining employer-provided health insurance from 60% to 73%, or increasing the job-specific hourly wage rate by $.80, are both associated with an equivalent 6% decrease in the hazard of the employer-worker match ending, although, on average, the dollar value of the wage benefit is higher.

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    Bibliographic Info

    Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number B1-2.

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    Date of creation: Jan 2002
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    Handle: RePEc:cpd:pd2002:b1-2

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    1. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
    2. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
    3. Kanika Kapur, 1998. "The Impact of health on job mobility: A measure of job lock," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(2), pages 282-298, January.
    4. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May.
    5. Lee A. LILLARD, 1999. "Job Turnover Heterogeneity and Person-Job-Specific Time-Series Wages," Annales d'Economie et de Statistique, ENSAE, issue 55-56, pages 183-210.
    6. Alan C. Monheit & Philip F. Cooper, 1994. "Health insurance and job mobility: Theory and evidence," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(1), pages 68-85, October.
    7. Brigitte C. Madrian, 1993. "Employment-Based Health Insurance and Job Mobility: Is There Evidence ofJob-Lock?," NBER Working Papers 4476, National Bureau of Economic Research, Inc.
    8. Joseph G. Altonji & Robert A. Shakotko, 1985. "Do Wages Rise With Job Seniority?," NBER Working Papers 1616, National Bureau of Economic Research, Inc.
    9. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-97, June.
    10. Donna B. Gilleskie & Byron F. Lutz, 2002. "The Impact of Employer-Provided Health Insurance on Dynamic Employment Transitions," Journal of Human Resources, University of Wisconsin Press, vol. 37(1), pages 129-162.
    11. Thomas C. Buchmueller & Robert G. Valletta, 1996. "The effects of employer-provided health insurance on worker mobility," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(3), pages 439-455, April.
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    Cited by:
    1. John M. Abowd & Paul A. Lengermann & Kevin L. McKinney, 2002. "The Measurement of Human Capital in the U.S. Economy," Longitudinal Employer-Household Dynamics Technical Papers 2002-09, Center for Economic Studies, U.S. Census Bureau, revised Mar 2003.

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