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Worker Sorting, Taxes and Health Insurance Coverage

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Author Info
Kevin Lang
Hong Kang

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Abstract

We develop a model in which firms hire heterogeneous workers but must offer all workers insurance benefits under similar terms. In equilibrium, some firms offer free health insurance, some require an employee premium payment and some do not offer insurance. Making the employee contribution pre-tax lowers the cost to workers of a given employee premium and encourages more firms to charge. This increases the offer rate, lowers the take-up rate, increases (decreases) coverage among high (low) demand groups, with an indeterminate overall effect. We test the model using the expansion of section 125 plans between 1987 and 1996. The results are generally supportive.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13066.

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Date of creation: Apr 2007
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Handle: RePEc:nbr:nberwo:13066

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Find related papers by JEL classification:
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions

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  1. Starr-McCluer, Martha, 1996. "Health Insurance and Precautionary Savings," American Economic Review, American Economic Association, vol. 86(1), pages 285-95, March.
    Other versions:
  2. Farber, Henry S. & Levy, Helen, 2000. "Recent trends in employer-sponsored health insurance coverage: are bad jobs getting worse?," Journal of Health Economics, Elsevier, vol. 19(1), pages 93-119, January. [Downloadable!] (restricted)
  3. Matthew S. Dey & Christopher J. Flinn, 2005. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Econometrica, Econometric Society, vol. 73(2), pages 571-627, 03. [Downloadable!] (restricted)
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  4. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February. [Downloadable!] (restricted)
  5. Pauly, Mark V, 1986. "Taxation, Health Insurance, and Market Failure in the Medical Economy," Journal of Economic Literature, American Economic Association, vol. 24(2), pages 629-75, June. [Downloadable!] (restricted)
  6. Kahn, Shulamit & Lang, Kevin, 1988. "Efficient Estimation of Structural Hedonic Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 157-66, February. [Downloadable!] (restricted)
  7. Dougherty, C R S, 1972. "Estimates of Labor Aggregation Functions," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1101-19, Nov.-Dec.. [Downloadable!] (restricted)
  8. Jaeger, David A, 1997. "Reconciling the Old and New Census Bureau Education Questions: Recommendations for Researchers," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 300-309, July.
  9. Dranove, David & Spier, Kathryn E. & Baker, Laurence, 2000. "'Competition' among employers offering health insurance," Journal of Health Economics, Elsevier, vol. 19(1), pages 121-140, January. [Downloadable!] (restricted)
  10. Jonathan Gruber & Robin McKnight, 2002. "Why Did Employee Health Insurance Contributions Rise?," NBER Working Papers 8878, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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