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Health Shocks, Health Insurance, Human Capital, and the Dynamics of Earnings and Health

Author

Listed:
  • Elena Capatina
  • Michael Keane

Abstract

We develop a life-cycle model of labor supply and human capital formation that incorporates health shocks, health insurance, and medical treatment decisions. We use the model to study effects of health shocks on health, labor supply, earnings, and earnings inequality. We also simulate provision of public insurance to agents who lack employer-sponsored insurance. While this increases medical spending substantially, it creates positive labor supply incentives for low-skill workers while reducing costs of social insurance, Medicaid, and free care. The net program cost is modest, and all model agents are ex ante better off in a balanced budget simulation.

Suggested Citation

  • Elena Capatina & Michael Keane, 2026. "Health Shocks, Health Insurance, Human Capital, and the Dynamics of Earnings and Health," Journal of Political Economy, University of Chicago Press, vol. 134(6), pages 1714-1774.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/739831
    DOI: 10.1086/739831
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