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Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked

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Author Info
David M. Cutler
Brigitte C. Madrian

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Abstract

Increases in the cost of providing health insurance must have some effect on labor markets, either in lower wages, changes in the composition of employment, or both. Despite a presumption that most of this effect will be in the form of lower wages, we document in this paper a significant effect on work hours as well. Using data from the CPS and the SIPP, we show that rising health insurance costs over the 1980s increased the hours worked of those with health insurance by up to 3 percent. We argue that this occurs because health insurance is a fixed cost, and as it becomes more expensive to provide, firms face an incentive to substitute hours per worker for the number of workers employed.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5525.

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Date of creation: Apr 1996
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Publication status: published as RAND Journal of Economics, Vol. 29 (1998): 509-530.
Handle: RePEc:nbr:nberwo:5525

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Find related papers by JEL classification:
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

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.:

  1. Montgomery, Mark, 1988. "On the Determinants of Employer Demand for Part-Time Workers," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 112-17, February. [Downloadable!] (restricted)
  2. Trejo, Stephen J, 1991. "The Effects of Overtime Pay Regulation on Worker Compensation," American Economic Review, American Economic Association, vol. 81(4), pages 719-40, September. [Downloadable!] (restricted)
  3. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May. [Downloadable!] (restricted)
  4. Mark Montgomery & James Cosgrove, 1993. "The effect of employee benefits on the demand for part-time workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(1), pages 87-98, October.
  5. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Cowling, Marc, 2007. "Still At Work? An empirical test of competing theories of long hours culture," MPRA Paper 1614, University Library of Munich, Germany. [Downloadable!]
  2. Meyer, Rebecca & Orazem, Peter & Wachenheim, William A., 2002. "Labor Market Implications of Rising Costs of Employer-Provided Health Insurance," Staff General Research Papers 10016, Iowa State University, Department of Economics. [Downloadable!]
  3. Katherine Baicker & Amitabh Chandra, 2005. "The Consequences of the Growth of Health Insurance Premiums," American Economic Review, American Economic Association, vol. 95(2), pages 214-218, May. [Downloadable!] (restricted)
  4. Sarah Dolfin, 2006. "An examination of firms' employment costs," Applied Economics, Taylor and Francis Journals, vol. 38(8), pages 861-878, May. [Downloadable!] (restricted)
  5. Brigitte C. Madrian & Lars John Lefgren, 1999. "A Note on Longitudinally Matching Current Population Survey (CPS) Respondents," NBER Technical Working Papers 0247, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Sang-Hyop Lee & Gerard Russo & Lawrence H. Nitz & Abdul Jabbar, 2005. "The Effect of Mandatory Employer-Sponsored Insurance (ESI) on Health Insurance Coverage and Labor Force Utilization in Hawaii: Evidence from the Current Population Survey (CPS) 1994-2004," Working Papers 200512, University of Hawaii at Manoa, Department of Economics. [Downloadable!]
  7. David J. Vanness, 2003. "A structural econometric model of family valuation and choice of employer-sponsored health insurance in the United States," Health Economics, John Wiley & Sons, Ltd., vol. 12(9), pages 771-790. [Downloadable!]
  8. Stephen B. DeLoach & Jennifer M. Platania, 2008. "The Macroeconomic Consequences of Financing Health Insurance," Working Papers 2008-04, Elon University, Department of Economics. [Downloadable!]
  9. Steven F. Lehrer & Nuno Sousa Pereira, 2007. "Worker Sorting, Compensating Differentials and Health Insurance: Evidence from Displaced Workers," NBER Working Papers 12951, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Brigitte Madrian, 2006. "The U.S. Health Care System and Labor Markets," NBER Working Papers 11980, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. A. S. Yelowitz, . "Using the Medicare Buy-In Program to Estimate the Effect of Medicaid on SSI Participation," Institute for Research on Poverty Discussion Papers 1102-96, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
    Other versions:
  12. A. M. Wolaver & T. D. McBride & B. L. Wolfe, . "Decreasing Opportunities for Low-Wage Workers: The Role of the Nondiscrimination Law for Employer-Provided Health Insurance," Institute for Research on Poverty Discussion Papers 1124-97, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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