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

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  • Steven F. Lehrer
  • Nuno Sousa Pereira

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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Publication status: published as Lehrer, Steven F. & Pereira, Nuno Sousa, 2007. "Worker sorting, compensating differentials and health insurance: Evidence from displaced workers," Journal of Health Economics, Elsevier, vol. 26(5), pages 1034-1056, September.
Handle: RePEc:nbr:nberwo:12951

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Cited by:
  1. Azuara, Oliver & Marinescu, Ioana, 2013. "Informality and the expansion of social protection programs: Evidence from Mexico," Journal of Health Economics, Elsevier, Elsevier, vol. 32(5), pages 938-950.
  2. Nan L. Maxwell, 2013. "The ACA, Health Care Costs, and Disparities in Employer-Sponsored Health Insurance," Mathematica Policy Research Reports, Mathematica Policy Research 7683, Mathematica Policy Research.
  3. Azuara, Oliver, 2011. "Effect of universal health coverage on marriage, cohabitation and labor force participation," MPRA Paper 35074, University Library of Munich, Germany.
  4. Amuedo-Dorantes, Catalina & Kimmel, Jean, 2008. "New Evidence on the Motherhood Wage Gap," IZA Discussion Papers 3662, Institute for the Study of Labor (IZA).
  5. Steven F. Lehrer & Nuno Sousa Pereira, 2008. "Worker Sorting, Health Insurance and Wages: Further Evidence from Displaced Workers in the United States," CEF.UP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 0804, Universidade do Porto, Faculdade de Economia do Porto.
  6. Azuara, Oliver & Marinescu, Ioana, 2011. "Informality and the expansion of social protection programs," MPRA Paper 35073, University Library of Munich, Germany.

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  1. Labor Economics (ECON 431)

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