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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. Costas Meghir & Renata Narita & Jean-Marc Robin, 2015. "Wages and Informality in Developing Countries," American Economic Review, American Economic Association, vol. 105(4), pages 1509-46, April.
  2. 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.
  3. Greg Kaplan, 2010. "Inequality and the Lifecycle," 2010 Meeting Papers 135, Society for Economic Dynamics.
  4. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers 3548, C.E.P.R. Discussion Papers.
  5. Costas Meghir & Renata Narita & Jean-Marc Robin, 2012. "Wages and Informality in Developing Countries," Working Papers 1018, Economic Growth Center, Yale University.
  6. Svetlana Pashchenko & Ponpoje Porapakkarm, 2013. "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 383-404, July.
  7. Martin B. Hackmann & Jonathan T. Kolstad & Amanda E. Kowalski, 2012. "Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform," Cowles Foundation Discussion Papers 1841, Cowles Foundation for Research in Economics, Yale University.
  8. Jean-Marc ROBIN & Sébastien ROUX, 2002. "An Equilibrium Model of the Labor Market with Endogenous Capital and Two-Sided Search," Annales d'Economie et de Statistique, ENSAE, issue 67-68, pages 257-307.
  9. Flinn, C. & Heckman, J., 1982. "New methods for analyzing structural models of labor force dynamics," Journal of Econometrics, Elsevier, vol. 18(1), pages 115-168, January.
  10. Rust, J., 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Working papers 9430, Wisconsin Madison - Social Systems.
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  12. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
  13. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 535-60, June.
  14. Charles J. Courtemanche & Daniela Zapata, 2014. "Does Universal Coverage Improve Health? The Massachusetts Experience," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 33(1), pages 36-69, 01.
  15. 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.
  16. Bontemps, Christian & Robin, Jean-Marc & van den Berg, Gerard J, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 305-58, May.
  17. Alma Cohen & Liran Einav, 2005. "Estimating Risk Preferences from Deductible Choice," Discussion Papers 04-031, Stanford Institute for Economic Policy Research.
  18. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage bargaining with on-the-job search: theory and evidence," Working Papers 150201, Institut National de la Recherche Agronomique, France.
  19. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  20. Jonathan T. Kolstad & Amanda E. Kowalski, 2010. "The Impact of Health Care Reform On Hospital and Preventive Care: Evidence from Massachusetts," NBER Working Papers 16012, National Bureau of Economic Research, Inc.
  21. Iourii Manovskii & Bjoern Bruegemann, 2010. "Fragility: A Quantitative Analysis of the US Health Insurance System," 2010 Meeting Papers 787, Society for Economic Dynamics.
  22. Andrew Shephard, 2011. "Equilibrium Search and Tax Credit Reform," Working Papers 1336, Princeton University, Department of Economics, Center for Economic Policy Studies..
  23. repec:dgr:uvatin:1998089 is not listed on IDEAS
  24. Gerard J. van den Berg, 1998. "Empirical Inference with Equilibrium Search Models of the Labor Market," Tinbergen Institute Discussion Papers 98-089/3, Tinbergen Institute.
  25. Bontemps, Christian & Robin, Jean-Marc & Van den Berg, Gerard J, 1999. "An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-74, November.
  26. 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.
  27. Hanming Fang & Alessandro Gavazza, 2010. "Dynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence," Working Papers 10-01, Duke University, Department of Economics.
  28. 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.
  29. Eckstein, Zvi & Wolpin, Kenneth I, 1990. "Estimating a Market Equilibrium Search Model from Panel Data on Individuals," Econometrica, Econometric Society, vol. 58(4), pages 783-808, July.
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