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An Equilibrium Model of Health Insurance Provision and Wage Determination

Author

Listed:
  • Dey, M. S.
  • Flinn, C. J.

Abstract

We investigate the e_ect of employer-provided health insurance on job mobility rates and economic welfare. In particular, we develop and estimate an equilibrium model of wage and health insurance determination that yields implications that are empirically observed. Namely, not all jobs provide health insurance and jobs with insurance pay higher wages than those without insurance. Using data from the 1990 to 1993 panels of the Survey of Income and Program Participation, we find that jobs that do provide health insurance last almost five times longer than jobs that do not. While this implies that the mobility rate for jobs without insurance is significantly higher than the mobility rate for jobs with insurance, this di_erence is welfare enhancing since jobs with health insurance are more productive jobs. Furthermore, simulations reveal that decreasing the health insurance premium paid by employers increases the steady state health insurance coverage rate, decreases the unemployment rate, but may or may not lead to productivity gains in the economy.

Suggested Citation

  • Dey, M. S. & Flinn, C. J., 2000. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Working Papers 00-18, C.V. Starr Center for Applied Economics, New York University.
  • Handle: RePEc:cvs:starer:00-18
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    File URL: http://econ.as.nyu.edu/docs/IO/9188/RR00-18.PDF
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    References listed on IDEAS

    as
    1. Gruber, Jonathan & Madrian, Brigitte C, 1995. "Health-Insurance Availability and the Retirement Decision," American Economic Review, American Economic Association, pages 938-948.
    2. Gruber, Jonathan & Hanratty, Maria, 1995. "The Labor-Market Effects of Introducing National Health Insurance: Evidence from Canada," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 163-173, April.
    3. repec:cdl:ucsbec:12-95 is not listed on IDEAS
    4. Christopher A. Pissarides, 1985. "Taxes, Subsidies and Equilibrium Unemployment," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 121-133.
    5. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
    6. Kanika Kapur, 1998. "The Impact of Health on Job Mobility: A Measure of Job Lock," ILR Review, Cornell University, ILR School, vol. 51(2), pages 282-298, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    HEALTH INSURANCE; EQUILIBRIUM MODELS; WAGE BARGAINING; JOB MOBILITY;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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