The effects of Medicaid expansion on labor market outcomes: Evidence from border counties

This paper provides new empirical evidence on the employment and earning effects of the recent Medicaid expansion. Unlike most existing studies that use a conventional state and year fixed effects approach, our main identification strategy is based on the comparison of employment and wages in contiguous county‐pairs in neighboring states (i.e., border counties) with different Medicaid expansion status. Using the 2008–2016 Quarterly Census of Employment and Wages, we estimate a set of distributed lag models in order to examine the dynamic effects of Medicaid expansion. Results from our preferred specification suggest a statistically significant decrease in total employment of 1.2% 1 year after the expansion of Medicaid. This translates into a 37% decrease in employment among newly eligible Medicaid enrollees under the strong assumption that Medicaid coverage did not crowd out private insurance coverage. We also find that this disemployment effect is transitory: 2 years after the Medicaid expansion employment returns to preexpansion levels. We do not find any statistically significant effect of the Medicaid expansion on wages at any point.