The Effect of Medicaid Expansions in the Late 1980s and Early 1990s on the Labor Supply of Pregnant Women

A substantial body of research has found that expansions in Medicaid eligibility increased enrollment in Medicaid, reduced the rate of uninsured, and reduced the rate of private health insurance coverage (i.e., crowd-out). Notably, no published research has examined the labor supply mechanism by which crowd-out could occur. This study examines the effects of expansions in Medicaid eligibility for pregnant women in the late 1980s and the early 1990s on labor supply, which is one of the possible mechanisms underlying crowd-out. Estimates suggest that the 20 percentage point increase in Medicaid eligibility during the sample period was associated with an 11–13 percent decrease in the probability that a woman who gave birth in the past year was employed. Among unmarried women with less than a high school education, the change in Medicaid eligibility reduced employment by approximately 13 percent to 16 percent. We find that most of this reduction in labor supply was associated with crowd-out (i.e., movement from private to public insurance concurrent with the shift in labor supply).