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The Role of Tax Subsidies in the Market for Health Insurance

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  • Mark Stabile

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Abstract

This paper investigates the role of tax subsidies in linking the market for health insurance to the employment relationship. Using both American and Canadian data, it investigates how these subsidies influence whether health insurance coverage is offered in different sized firms and whether it is offered through an employer versus the individual private market. The findings indicate that tax subsidies encourage the provision of insurance in smaller firms. Removal of the subsidies would cause the level of insurance in small firms to decline significantly, but would not cause a large change in the level of insurance in larger firms. Part of this decline would be offset by increases in the market for individually purchased insurance. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Mark Stabile, 2002. "The Role of Tax Subsidies in the Market for Health Insurance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(1), pages 33-50, January.
  • Handle: RePEc:kap:itaxpf:v:9:y:2002:i:1:p:33-50
    DOI: 10.1023/A:1014461622779
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    References listed on IDEAS

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    1. Holmer, Martin, 1984. "Tax policy and the demand for health insurance," Journal of Health Economics, Elsevier, vol. 3(3), pages 203-221, December.
    2. Jonathan Gruber & James M. Poterba, 1993. "Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed," NBER Working Papers 4435, National Bureau of Economic Research, Inc.
    3. William M. Gentry & Eric Peress, 1994. "Taxes and Fringe Benefits Offered by Employers," NBER Working Papers 4764, National Bureau of Economic Research, Inc.
    4. Holtz-Eakin, Douglas & Penrod, John R. & Rosen, Harvey S., 1996. "Health insurance and the supply of entrepreneurs," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 209-235, October.
    5. Marquis, M Susan & Phelps, Charles E, 1987. "Price Elasticity and Adverse Selection in the Demand for Supplementary Health Insurance," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 299-313, April.
    6. Mark Stabile, 2001. "Private insurance subsidies and public health care markets: evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 921-942, November.
    7. Woodbury, Stephen A, 1983. "Substitution between Wage and Nonwage Benefits," American Economic Review, American Economic Association, vol. 73(1), pages 166-182, March.
    8. Jonathan Gruber, 1998. "Health Insurance and the Labor Market," NBER Working Papers 6762, National Bureau of Economic Research, Inc.
    9. Manning, Willard G. & Blumberg, Linda & Moulton, Lawrence H., 1995. "The demand for alcohol: The differential response to price," Journal of Health Economics, Elsevier, vol. 14(2), pages 123-148, June.
    10. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-280, Part I, M.
    11. Keeler, Emmett B & Morrow, Daniel T & Newhouse, Joseph P, 1977. "The Demand for Supplementary Health Insurance, or Do Deductibles Matter?," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 789-801, August.
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    Cited by:

    1. Mark Stabile & Sarah Thomson, 2014. "The Changing Role of Government in Financing Health Care: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 480-518, June.
    2. Glied, Sherry & Hong, Kai, 2018. "Health care in a multi-payer system: Spillovers of health care service demand among adults under 65 on utilization and outcomes in medicare," Journal of Health Economics, Elsevier, vol. 60(C), pages 165-176.

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    Keywords

    tax subsidies; health insurance;

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