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Wedges, Wages, and Productivity under the Affordable Care Act

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  • Casey B. Mulligan
  • Trevor S. Gallen

Abstract

Our paper documents the large labor market wedges created by taxes, subsidies, and regulations included in the Affordable Care Act. The law changes terms of trade in both goods and factor markets for firms offering health insurance coverage. We use a multi-sector (intra-national) trade model to predict and quantify consequences of the Affordable Care Act for the patterns of output, labor usage, and employee compensation. We find that the law will significantly redistribute from high-wage workers to low-wage workers and to non-workers, reduce total factor productivity about one percent, reduce per-capita labor hours about three percent (especially among low-skill workers), reduce output per capita about two percent, and reduce employment less for sectors that ultimately pay employer penalties.

Suggested Citation

  • Casey B. Mulligan & Trevor S. Gallen, 2013. "Wedges, Wages, and Productivity under the Affordable Care Act," NBER Working Papers 19771, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19771
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    References listed on IDEAS

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    1. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215-215.
    2. Trevor S. Gallen & Casey B. Mulligan, 2018. "Wedges, Labor Market Behavior, and Health Insurance Coverage under the Affordable Care Act," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(1), pages 75-120, March.
    3. Unel, Bulent, 2010. "Analyzing skilled and unskilled labor efficiencies in the US," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 957-967, December.
    4. Brigitte C. Madrian, 1994. "Employment-Based Health Insurance and Job Mobility: Is there Evidence of Job-Lock?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 27-54.
    5. Richard V. Burkhauser & Sean Lyons & Kosali I. Simon, 2011. "The Importance of the Meaning and Measurement of "Affordable" in the Affordable Care Act," NBER Working Papers 17279, National Bureau of Economic Research, Inc.
    6. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
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    Cited by:

    1. Casey B. Mulligan, 2014. "The Economics of Work Schedules under the New Hours and Employment Taxes," NBER Working Papers 19936, National Bureau of Economic Research, Inc.
    2. You, Jing & Wang, Shaoyang, 2018. "Unemployment duration and job-match quality in urban China: The dynamic impact of 2008 Labor Contract Law," Economic Modelling, Elsevier, vol. 71(C), pages 220-233.
    3. Casey B. Mulligan, 2012. "The ARRA: Some Unpleasant Welfare Arithmetic," NBER Working Papers 18591, National Bureau of Economic Research, Inc.
    4. Compton, Andrew, 2019. "A Search Theoretic Model of Part-Time Employment and Multiple Job Holdings," MPRA Paper 97003, University Library of Munich, Germany.
    5. Casey B. Mulligan, 2015. "The New Full-Time Employment Taxes," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 89-132.
    6. Yelowitz, Aaron & Ingram, Samuel J., 2021. "How Does Occupational Licensing Affect Entry into the Medical Field? An Examination of EMTs," IZA Discussion Papers 14071, Institute of Labor Economics (IZA).
    7. Trevor S. Gallen & Casey B. Mulligan, 2018. "Wedges, Labor Market Behavior, and Health Insurance Coverage under the Affordable Care Act," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(1), pages 75-120, March.
    8. Rajashri Chakrabarti & Maxim Pinkovskiy, 2019. "The Affordable Care Act and the Market for Higher Education," CESifo Working Paper Series 7869, CESifo.

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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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