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Worker Sorting, Health Insurance and Wages: Further Evidence from Displaced Workers in the United States

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Author Info
Steven F. Lehrer () (School of Policy Studies and Department of Economics, Queen’s University)
Nuno Sousa Pereira () (CETE, Faculdade de Economia, Universidade do Porto)

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Abstract

The United States has the distinction of being the only industrialized nation without universal health insurance. Health insurance may have impacts on the US labor market. We use data on displaced workers over a 25 year period to document how the role of health insurance on wages and worker sorting has evolved. We find that the provision of health insurance increasingly influences wage inequality. Our results indicate that the portion of the unadjusted wage gap due only to selection bias from unobserved (to the analyst) characteristics, such as ability or innate health status has grown rapidly since 2000. Further, while there have been substantial changes in how displaced workers sort to firms that offer health insurance benefits over the last 25 years, many of the patterns have reversed directions over the past six years. Finally, we discuss the policy implications of our results.

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Publisher Info
Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CETE Discussion Papers with number 0804.

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Length: 31 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:por:cetedp:0804

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Related research
Keywords: Health insurance; Worker sorting; Displacement; Comparative advantage; Non-linear instrumental variables;

Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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References listed on IDEAS
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  1. 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. [Downloadable!] (restricted)
    Other versions:
  2. David M. Cutler & Brigitte C. Madrian, 1998. "Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 509-530, Autumn. [Downloadable!] (restricted)
    Other versions:
  3. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April. [Downloadable!] (restricted)
    Other versions:
  4. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    Other versions:
  5. 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)
  6. Madrian, Brigitte C, 1994. "Employment-Based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 27-54, February. [Downloadable!] (restricted)
    Other versions:
  7. Crane, Steven E & Nourzad, Farrokh, 1986. "Inflation and Tax Evasion: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 217-23, May. [Downloadable!] (restricted)
  8. repec:fth:prinin:398 is not listed on IDEAS
  9. Gruber, Jonathan & Hanratty, Maria, 1995. "The Labor-Market Effects of Introducing National Health Insurance: Evidence from Canada," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 163-73, April.
    Other versions:
  10. Helen Levy, 1998. "Who Pays for Health Insurance? Employee Contributions to Health Insurance Premiums," Working Papers 777, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  11. Jonathan Gruber & Michael Lettau, 2000. "How Elastic is the Firm's Demand for Health Insurance?," NBER Working Papers 8021, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Gruber, Jonathan & Lettau, Michael, 2004. "How elastic is the firm's demand for health insurance?," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1273-1293, July. [Downloadable!] (restricted)
  13. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-72, June. [Downloadable!] (restricted)
    Other versions:
  14. Frank A. Scott & Mark C. Berger & Dan A. Black, 1989. "Effects of the tax treatment of fringe benefits on labor market segmentation," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 42(2), pages 216-229, January.
  15. Thomas C. Buchmueller & John DiNardo & Robert G. Valletta, 2002. "Union effects on health insurance provision and coverage in the United States," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(4), pages 610-627, July.
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  16. Lemieux, Thomas, 1998. "Estimating the Effects of Unions on Wage Inequality in a Panel Data Model with Comparative Advantage and Nonrandom Selection," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 261-91, April. [Downloadable!] (restricted)
  17. Hamermesh, Daniel S, 1987. "The Costs of Worker Displacement," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 51-75, February. [Downloadable!] (restricted)
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  18. Marquis, M. Susan & Long, Stephen H., 1995. "Worker demand for health insurance in the non-group market," Journal of Health Economics, Elsevier, vol. 14(1), pages 47-63, May. [Downloadable!] (restricted)
  19. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August. [Downloadable!] (restricted)
  20. Andrew Dyke & Carolyn J. Heinrich & Peter R. Mueser & Kenneth R. Troske & Kyung-Seong Jeon, 2006. "The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 567-608, July. [Downloadable!]
    Other versions:
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