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The Determinants of Rising Inequality in Health Insurance and Wages: An Equilibrium Model of Workers' Compensation and Health Care Policies

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  • Rong Hai

    ()
    (Department of Economics, University of Pennsylvania)

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Abstract

I develop and structurally estimate a non-stationary overlapping generations equilibrium model of employment and workers' health insurance and wage compensation, to investigate the determinants of rising inequality in health insurance and wages in the U.S. over the last 30 years. I find that skill-biased technological change and the rising cost of medical care services are the two most important determinants, while the impact of Medicaid eligibility expansion is quantitatively small. I conduct counterfactual policy experiments to analyze key features of the 2010 Patient Protection and Affordable Care Act, including employer mandates and further Medicaid eligibility expansion. I find that (i) an employer mandate reduces both wage and health insurance coverage inequality, but also lowers the employment rate of less educated individuals; and (ii) further Medicaid eligibility expansion increases employment rate of less educated individuals, reduces health insurance coverage disparity, but also causes larger wage inequality.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 13-019.

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Length: 64 pages
Date of creation: 16 Jan 2013
Date of revision:
Handle: RePEc:pen:papers:13-019

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Keywords: Labor Market; Health Insurance; Health Care Policies; Inequality;

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  1. Alma Cohen & Liran Einav, 2005. "Estimating Risk Preferences from Deductible Choice," NBER Working Papers 11461, National Bureau of Economic Research, Inc.
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  14. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2012. "Quantitative analysis of health insurance reform: separating regulation from redistribution," MPRA Paper 41193, University Library of Munich, Germany.
  15. Fatih Guvenen & Burhanettin Kuruscu & Serdar Ozkan, 2009. "Taxation of Human Capital and Wage Inequality: A Cross-Country Analysis," NBER Working Papers 15526, National Bureau of Economic Research, Inc.
  16. Donghoon Lee & Kenneth I. Wolpin, 2004. "Intersectoral Labor Mobility and the Growth of the Service Sector," PIER Working Paper Archive 04-036, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  17. David Card & Carlos Dobkin & Nicole Maestas, 2009. "Does Medicare Save Lives?," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 597-636, May.
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