The Labor Market Effects of Rising Health Insurance Premiums
AbstractSince 2000, premiums for employer-provided health insurance have increased by 59 percent with little corresponding increase in the generosity of coverage. The effect of this increase in costs on wages and employment will depend on workers' valuation of the benefit, the elasticities of labor supply and demand, and institutional constraints on employers' ability to lower wages. Measuring these effects is difficult, however, without a source of exogenous variation in the cost of benefits. We use variation in medical malpractice payments driven by the recent "medical malpractice crisis" to identify the causal effect of rising health insurance premiums on wages, employment, and health insurance coverage. We estimate that a 10 percent increase in health insurance premiums reduces the aggregate probability of being employed by 1.6 percent and hours worked by 1 percent, and increases the likelihood that a worker is employed only part-time by 1.9 percent. For workers covered by employer provided health insurance, this increase in premiums results in an offsetting decrease in wages of 2.3 percent. Thus, rising health insurance premiums may both increase the ranks of the unemployed and place an increasing burden on workers through decreased wages for workers with employer health insurance and decreased hours for workers moved from full time jobs with benefits to part time jobs without.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11160.
Date of creation: Feb 2005
Date of revision:
Note: HE LS PE AG
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Other versions of this item:
- Katherine Baicker & Amitabh Chandra, 2006. "The Labor Market Effects of Rising Health Insurance Premiums," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 609-634, July.
- I1 - Health, Education, and Welfare - - Health
- J0 - Labor and Demographic Economics - - General
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-03-06 (All new papers)
- NEP-HEA-2005-03-06 (Health Economics)
- NEP-HIS-2004-12-21 (Business, Economic & Financial History)
- NEP-IAS-2005-03-06 (Insurance Economics)
- NEP-LAB-2005-03-06 (Labour Economics)
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