Employer-financed health insurance systems, like that used in the United States, distort firms' labor demand and adversely affect the economy. Since such costs vary with employment rather than hours worked, firms have an incentive to increase output by increasing worker hours rather than employment. Given that the returns to employment exceed the returns to hours worked, this results in lower levels of employment and output. In this paper we construct a heterogeneous agent general equilibrium model where individuals differ with respect to their productivity and employment opportunities. Calibrating the model to the U.S. economy, we generate steady state results for several alternative models for financing health insurance: one in which health insurance is financed primarily through employer contributions that vary with employment; a second where insurance is funded through a non-distortionary, lump-sum tax; and a third where insurance is funded by a payroll tax. We measure the effects of each of the alternatives on output, employment, hours worked and inequality.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Elon University, Department of Economics in its series Working Papers with number
2008-04.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: