Health insurance as a productive factor
AbstractIn this paper, we present a less-explored channel through which health insurance impacts productivity: by offering health insurance, employers reduce the expected time workers spend out of work in sick days. Using data from the Medical Expenditure Panel Survey (MEPS), we show that a worker with health coverage misses on average 52% fewer workdays than uninsured workers, after controlling for endogeneity. We develop a model that embodies this impact of health coverage in productivity. In our model, health insurance reduces the probability that a healthy worker gets sick, missing workdays, and it increases the probability that a sick worker recovers and returns to work. In our model, firms that offer health insurance are larger and pay higher wages in equilibrium, a pattern observed in the data. We calibrated the model using US data for 2004 and show the impact of increases in health costs, as well as of changes in tax benefits of health insurance expenses, on labor force health coverage and productivity. Finally, we show that a government mandate that forces firms to offer health insurance increases average wages and aggregate productivity while reducing aggregate profits, ultimately having a positive impact on welfare.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39743.
Date of creation: 29 Jun 2012
Date of revision:
Health; Health Insurance; Labor Productivity; Labor Markets;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- I10 - Health, Education, and Welfare - - Health - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-HEA-2012-07-08 (Health Economics)
- NEP-IAS-2012-07-08 (Insurance Economics)
- NEP-LAB-2012-07-08 (Labour Economics)
- NEP-MAC-2012-07-08 (Macroeconomics)
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