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Equilibrium Labor Market Search and Health Insurance Reform

  • Naoki Aizawa

    ()

    (Department of Economics, University of Pennsylvania)

  • Hanming Fang

    ()

    (Department of Economics, University of Pennsylvania)

We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers' health compositions. We estimate our model by Generalized Method of Moments using a combination of micro data sources including Survey of Income and Program Participation (SIPP), Medical Expenditure Panel Survey (MEPS) and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from 20.12% to 7.27%. We also examine a variety of alternative policies to understand the roles of different components of the ACA in contributing to these equilibrium changes. Interestingly, we find that the uninsured rate will be even lower (at 6.44%) if the employer mandate in the ACA is eliminated.

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File URL: http://economics.sas.upenn.edu/system/files/13-002.pdf
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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 13-002.

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Length: 61 pages
Date of creation: 10 Jan 2013
Date of revision:
Handle: RePEc:pen:papers:13-002
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  1. repec:inr:wpaper:155908 is not listed on IDEAS
  2. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
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  4. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2010. "Quantitative Analysis of Health Insurance Reform: Separating Community Rating from Income Redistribution," MPRA Paper 26158, University Library of Munich, Germany.
  5. Matthew S. Dey & Christopher J. Flinn, 2005. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Econometrica, Econometric Society, vol. 73(2), pages 571-627, 03.
  6. Svetlana Pashchenko & Ponpoje Porapakkarm, 2012. "Online Appendix to "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution"," Technical Appendices 11-70, Review of Economic Dynamics.
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  11. Dizioli, Allan & Pinheiro, Roberto B., 2012. "Health insurance as a productive factor," MPRA Paper 39743, University Library of Munich, Germany.
  12. Albrecht, James W & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Paper Series 99, Research Institute of Industrial Economics.
  13. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, 03.
  14. Costas Meghir & Renata Narita & Jean-Marc Robin, 2012. "Wages and Informality in Developing Countries," NBER Working Papers 18347, National Bureau of Economic Research, Inc.
  15. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2012. "Quantitative analysis of health insurance reform: separating regulation from redistribution," MPRA Paper 41193, University Library of Munich, Germany.
  16. Greg Kaplan, 2010. "Inequality and the Lifecycle," 2010 Meeting Papers 135, Society for Economic Dynamics.
  17. Hanming Fang & Alessandro Gavazza, 2011. "Dynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence," American Economic Review, American Economic Association, vol. 101(7), pages 3047-77, December.
  18. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
  19. Charles J. Courtemanche & Daniela Zapata, 2012. "Does Universal Coverage Improve Health? The Massachusetts Experience," NBER Working Papers 17893, National Bureau of Economic Research, Inc.
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  22. Christian Bontemps & Jean-Marc Robin & Gérard J. Van den Berg, 1999. "An Empirical Equilibrium Job Search Model With Search on the Job and Heterogeneous Workers and Firms," Post-Print hal-00357757, HAL.
  23. Kolstad, Jonathan T. & Kowalski, Amanda E., 2012. "The impact of health care reform on hospital and preventive care: Evidence from Massachusetts," Journal of Public Economics, Elsevier, vol. 96(11), pages 909-929.
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