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The Efficiency of a Group-Specific Mandated Benefit: Evidence from Health Insurance Benefits for Maternity

  • Gruber, J.

I consider the effects of "group-specific mandated benefits", such as mandated maternity leave, which raise the costs of employing a demographically identifiable group. The efficiency of these policies, relative to more broad-based financing of benefits expansions, will largely be a function of the valuation of the mandated benefit by the targeted group. Such valuation should be reflected in substantial shifting of the cost of the mandate to groupspecific wages; however, there may be barriers to the adjustment of relative wages which impede such shifting. I study several 1976 state mandates which stipulated that childbirth be covered comprehensively in health insurance plans, increasing the cost of insuring women of child-bearing age by as much as 5 % of their wages. I find substantial shifting of the costs of these mandates to the wages of the targeted group. Correspondingly, I find little effect on total labor input for the group which benefitted from these mandates; hours rise and employment falls, as may be expected from an increase in the fixed costs of employment. These results are confirmed by using a 1978 Federal mandate as a "reverse experiment".

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Paper provided by Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 92-19.

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Length: 50 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:mit:worpap:92-19
Contact details of provider: Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Web page: http://econ-www.mit.edu/

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  1. Richard B. Freeman, 1979. "The Effect of Demographic Factors on Age-Earnings Profiles," NBER Working Papers 0316, National Bureau of Economic Research, Inc.
  2. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
  3. Jonathan Gruber & Alan Krueger, 1990. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensations Insurance," Working Papers 659, Princeton University, Department of Economics, Industrial Relations Section..
  4. Gruber, J., 1992. "State Mandated Benefits and Employer Provided Health Insurance," Working papers 92-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. repec:fth:harver:1520 is not listed on IDEAS
  6. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  7. Joshua D. Angrist, 1990. "The Effect of Veterans Benefits on Veterans' Education and Earnings," NBER Working Papers 3492, National Bureau of Economic Research, Inc.
  8. Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March.
  9. Arleen Leibowitz, 1983. "Fringe Benefits in Employee Compensation," NBER Chapters, in: The Measurement of Labor Cost, pages 371-394 National Bureau of Economic Research, Inc.
  10. Olivia S. Mitchell, 1990. "The Effects of Mandating Benefits Packages," NBER Working Papers 3260, National Bureau of Economic Research, Inc.
  11. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 251-80, Part I, M.
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