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Worker Sorting, Compensating Differentials and Health Insurance: Evidence from Displaced Workers

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Author Info
Steven F. Lehrer
Nuno Sousa Pereira

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Abstract

This article introduces an empirical strategy to the compensating differentials literature that i) allows both individual observed and unobserved characteristics to be rewarded differently in firms based on health insurance provision, and ii) selection to jobs that provide benefits to operate on both sides of the labor market. Estimates of this model are used to directly test empirical assumptions that are made with popular econometric strategies in the health economics literature. Our estimates reject the assumptions underlying numerous cross sectional and longitudinal estimators. We find that the provision of health insurance has influenced wage inequality. Finally, our results suggest there have been substantial changes in how displaced workers sort to firms that offer health insurance benefits over the past two decades. We discuss the implications of our findings for the compensating differentials literature.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12951.

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Date of creation: Mar 2007
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Handle: RePEc:nbr:nberwo:12951

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Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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    Other versions:
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