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Wedges, Labor Market Behavior, and Health Insurance Coverage under the Affordable Care Act

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  • Trevor S. Gallen
  • Casey B. Mulligan

Abstract

The Affordable Care Act's taxes, subsidies, and regulations significantly alter terms of trade in both goods and factor markets. We use an extended version of the classic Harberger model to predict and quantify consequences of the Affordable Care Act for the incidence of health insurance coverage and patterns of labor usage. If and when the new exchange plans are competitive with employer-sponsored insurance (ESI), our model predicts that more than 22 million people will leave ESI as a consequence of the law. Behavioral changes are expected to add two million participants to the new exchange plans: beyond those that would participate solely as the result of employer decisions to stop offering coverage and beyond those who would have been uninsured. We find large differences in coverage-pattern impacts based on the benefit (including tax incentives) of joining exchange plans and degree to which statutory penalties on individuals and firms are implemented: If exchange plans were not valued while the individual mandate were fully enforced, ESI could potentially even expand.

Suggested Citation

  • Trevor S. Gallen & Casey B. Mulligan, 2018. "Wedges, Labor Market Behavior, and Health Insurance Coverage under the Affordable Care Act," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(1), pages 75-120, March.
    • Handle: RePEc:ntj:journl:v:71:y:2018:i:1:p:75-120
    DOI: 10.17310/ntj.2018.1.03
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    References listed on IDEAS

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    1. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215-215.
    2. Unel, Bulent, 2010. "Analyzing skilled and unskilled labor efficiencies in the US," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 957-967, December.
    3. Casey B. Mulligan & Trevor S. Gallen, 2013. "Wedges, Wages, and Productivity under the Affordable Care Act," NBER Working Papers 19771, National Bureau of Economic Research, Inc.
    4. Richard V. Burkhauser & Sean Lyons & Kosali I. Simon, 2011. "The Importance of the Meaning and Measurement of "Affordable" in the Affordable Care Act," NBER Working Papers 17279, National Bureau of Economic Research, Inc.
    5. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
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    Cited by:

    1. Tim Bersak, 2019. "Identification of Job Lock and Inefficient Labor Market Mobility," Southern Economic Journal, John Wiley & Sons, vol. 86(2), pages 530-547, October.
    2. Casey B. Mulligan & Trevor S. Gallen, 2013. "Wedges, Wages, and Productivity under the Affordable Care Act," NBER Working Papers 19771, National Bureau of Economic Research, Inc.
    3. Casey B. Mulligan, 2015. "The New Full-Time Employment Taxes," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 89-132.
    4. Casey B. Mulligan, 2019. "The Employer Penalty, Voluntary Compliance, and the Size Distribution of Firms: Evidence from a Survey of Small Businesses," NBER Chapters, in: Tax Policy and the Economy, Volume 34, pages 139-171, National Bureau of Economic Research, Inc.
    5. Rajashri Chakrabarti & Maxim Pinkovskiy, 2019. "The Affordable Care Act and the Market for Higher Education," CESifo Working Paper Series 7869, CESifo.

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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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