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The Determinants of Rising Inequality in Health Insurance and Wages: An Equilibrium Model of Workers' Compensation and Health Care Policies

  • Rong Hai

    ()

    (Department of Economics, University of Pennsylvania)

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I develop and structurally estimate a non-stationary overlapping generations equilibrium model of employment and workers' health insurance and wage compensation, to investigate the determinants of rising inequality in health insurance and wages in the U.S. over the last 30 years. I find that skill-biased technological change and the rising cost of medical care services are the two most important determinants, while the impact of Medicaid eligibility expansion is quantitatively small. I conduct counterfactual policy experiments to analyze key features of the 2010 Patient Protection and Affordable Care Act, including employer mandates and further Medicaid eligibility expansion. I find that (i) an employer mandate reduces both wage and health insurance coverage inequality, but also lowers the employment rate of less educated individuals; and (ii) further Medicaid eligibility expansion increases employment rate of less educated individuals, reduces health insurance coverage disparity, but also causes larger wage inequality.

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File URL: http://economics.sas.upenn.edu/sites/economics.sas.upenn.edu/files/13-019_0.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 13-019.

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Length: 64 pages
Date of creation: 16 Jan 2013
Date of revision:
Handle: RePEc:pen:papers:13-019
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  1. David M. Blau & Donna B. Gilleskie, 2008. "The Role Of Retiree Health Insurance In The Employment Behavior Of Older Men," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 475-514, 05.
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  3. Iourii Manovskii & Bjoern Bruegemann, 2010. "Fragility: A Quantitative Analysis of the US Health Insurance System," 2010 Meeting Papers 787, Society for Economic Dynamics.
  4. Kjetil Storesletten & Gianluca Violante & Jonathan Heathcote, 2012. "Redistributive Taxation in a Partial Insurance Economy," 2012 Meeting Papers 588, Society for Economic Dynamics.
  5. Greg Kaplan, 2010. "Inequality and the Lifecycle," 2010 Meeting Papers 135, Society for Economic Dynamics.
  6. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
  7. Alma Cohen & Liran Einav, 2005. "Estimating Risk Preferences from Deductible Choice," Discussion Papers 04-031, Stanford Institute for Economic Policy Research.
  8. Fatih Guvenen & Burhanettin Kuruscu & Serdar Ozkan, 2013. "Taxation of human capital and wage inequality: a cross-country analysis," Finance and Economics Discussion Series 2013-20, Board of Governors of the Federal Reserve System (U.S.).
  9. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2012. "Quantitative analysis of health insurance reform: separating regulation from redistribution," MPRA Paper 41193, University Library of Munich, Germany.
  10. Lee, Donghoon & Wolpin, Kenneth I., 2010. "Accounting for wage and employment changes in the US from 1968-2000: A dynamic model of labor market equilibrium," Journal of Econometrics, Elsevier, vol. 156(1), pages 68-85, May.
  11. Brooks Pierce, 2001. "Compensation Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1493-1525.
  12. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  13. Donghoon Lee & Kenneth I. Wolpin, 2006. "Intersectoral Labor Mobility and the Growth of the Service Sector," Econometrica, Econometric Society, vol. 74(1), pages 1-46, 01.
  14. Janet Currie & Jonathan Gruber, 1995. "Health Insurance Eligibility, Utilization of Medical care, and Child Health," NBER Working Papers 5052, National Bureau of Economic Research, Inc.
  15. Dey, M. S. & Flinn, C. J., 2000. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Working Papers 00-18, C.V. Starr Center for Applied Economics, New York University.
  16. David Card & Carlos Dobkin & Nicole Maestas, 2009. "Does Medicare Save Lives?," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 597-636.
  17. 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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