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Labor market sorting and health insurance system design

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  • Naoki Aizawa

Abstract

This paper develops and estimates a life‐cycle equilibrium labor search model in which heterogeneous firms determine health insurance provisions and heterogeneous workers sort themselves into jobs with different compensation packages over the life cycle. I study the optimal joint design of major policies in the Affordable Care Act (ACA) and the implications of targeting these policies to certain individuals. Compared with the health insurance system under the ACA, the optimal structure lowers the tax benefit of employer‐sponsored health insurance and makes individual insurance more attractive to younger workers. Through changes in firms' insurance provisions, a greater number of younger workers sort into individual markets, which contributes to improving the risk pool in individual insurance and lowering the uninsured risk.

Suggested Citation

  • Naoki Aizawa, 2019. "Labor market sorting and health insurance system design," Quantitative Economics, Econometric Society, vol. 10(4), pages 1401-1451, November.
    • Handle: RePEc:wly:quante:v:10:y:2019:i:4:p:1401-1451
    DOI: 10.3982/QE1145
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    Cited by:

    1. Jacobs, Lindsay, 2023. "Occupations, retirement, and the value of disability insurance," Journal of Public Economics, Elsevier, vol. 225(C).
    2. Naoki Aizawa & Chao Fu, 2020. "Interaction of the Labor Market and the Health Insurance System: Employer-Sponsored, Individual, and Public Insurance," NBER Working Papers 26713, National Bureau of Economic Research, Inc.
    3. Amy Finkelstein & Casey McQuillan & Owen Zidar & Eric Zwick, 2023. "The Health Wedge and Labor Market Inequality," Working Papers 2023-01, Princeton University. Economics Department..
    4. Tsvetkova, Liudmila & Okhrimenko, Igor & Belousova, Tamara & Khuzhamov, Leonid, 2022. "Relationship and mutual influence between poverty and insurance in a developing insurance market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 36(C).
    5. Naoki Aizawa & You Suk Kim, 2020. "Public and Private Provision of Information in Market-Based Public Programs: Evidence from Advertising in Health Insurance Marketplaces," NBER Working Papers 27695, National Bureau of Economic Research, Inc.
    6. Hanming Fang & Andrew J. Shephard, 2019. "Household Labor Search, Spousal Insurance, and Health Care Reform," NBER Working Papers 26350, National Bureau of Economic Research, Inc.
    7. Otsu, Yuki & Yuen, C.Y. Kelvin, 2022. "Health, crime, and the labor market: Theory and policy analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    8. Vegard M. Nygaard & Gajendran Raveendranathan, 2021. "The impact of U.S. employer-sponsored insurance in the 20th century," Department of Economics Working Papers 2021-11, McMaster University.
    9. White, Matthew N., 2023. "Self-reported health status and latent health dynamics," Journal of Health Economics, Elsevier, vol. 88(C).

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