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Health Insurance and the Labor Supply Decisions of Older Workers: Evidence from the U.S. Department of Veterans Affairs

Author

Listed:
  • Melissa Boyle

    () (Department of Economics, College of the Holy Cross)

  • Joanna N. Lahey

    () (Texas A&M University)

Abstract

This paper exploits a major mid-1990s expansion in the U.S. Department of Veterans Affairs health care system to provide evidence on the labor market effects of expanding health insurance availability. Using data from the Current Population Survey, we compare the labor market behavior of older veterans and non-veterans before and after the VA health benefits expansion to test the impact of public health insurance on labor supply. We find that older workers are significantly more likely to decrease work both on the extensive and intensive margins after receiving access to non-employer based insurance. Older workers are also more likely to leave self-employment, a result inconsistent with "job-lock" effects of employer-based insurance, but consistent with a positive income effect from new access to public insurance. Some relatively disadvantaged subpopulations, however, may increase their labor supply after gaining greater access to public insurance, consistent with complementary positive health effects of health care access for these groups. We conclude that this reform has affected employment and retirement decisions, and suggest that future moves toward universal coverage or expansions of Medicare are likely to have significant labor market effects. To illustrate, we calculate that as much as 10% of the difference in retirement rates in the US and Canada may be due to Canada's provision of universal health care.

Suggested Citation

  • Melissa Boyle & Joanna N. Lahey, 2008. "Health Insurance and the Labor Supply Decisions of Older Workers: Evidence from the U.S. Department of Veterans Affairs," Working Papers 0801, College of the Holy Cross, Department of Economics.
  • Handle: RePEc:hcx:wpaper:0801
    as

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    File URL: http://web.holycross.edu/RePEc/hcx/HC0801-Boyle_VeteransInsurance.pdf
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    Cited by:

    1. Robert W. Fairlie & Kanika Kapur & Susan Gates, 2016. "Job Lock: Evidence from a Regression Discontinuity Design," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(1), pages 92-121, January.
    2. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09hai2o91j4 is not listed on IDEAS
    3. Vincent Touzé, 2010. "Le système de retraite américain : impact de la crise et tendances de long terme," Documents de Travail de l'OFCE 2010-27, Observatoire Francais des Conjonctures Economiques (OFCE).
    4. Gérard Cornilleau & Catherine Mathieu & Henri Sterdyniak & Vincent Touzé, 2010. "Les réformes des retraites en Europe dans la crise," Documents de Travail de l'OFCE 2010-17, Observatoire Francais des Conjonctures Economiques (OFCE).
    5. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h8492c58l is not listed on IDEAS

    More about this item

    Keywords

    labor supply; job-lock; retirement; older workers; health insurance; VA; Medicare; veteran;

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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