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The elusive wage-benefit trade-off: The case of employer-provided health insurance

Listed author(s):
  • DeVaro, Jed
  • Maxwell, Nan L.

This study shows that standard regressions estimated to measure a trade-off between wages and health insurance are misspecified by insufficiently accounting for establishment and firm size; an interactive, size-corrected specification is more likely to reveal a trade-off. Furthermore, because insurance decisions are typically made by firms, and wages set by establishments, the insurance constraint on establishments in multi-establishment firms weakens the trade-off. We use model-generated data to show that both factors contribute to the failure in previous research to identify a trade-off, and data from a cross section of Northern Californian establishments to test for a trade-off in multi-establishment and single-establishment firms.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167718714000630
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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 37 (2014)
Issue (Month): C ()
Pages: 23-37

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Handle: RePEc:eee:indorg:v:37:y:2014:i:c:p:23-37
DOI: 10.1016/j.ijindorg.2014.07.004
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  22. Royalty, Anne Beeson, 2008. "Estimating workers' marginal valuation of employer health benefits: Would insured workers prefer more health insurance or higher wages," Journal of Health Economics, Elsevier, vol. 27(1), pages 89-105, January.
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