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Health insurance as a productive factor

Author

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  • Dizioli, Allan
  • Pinheiro, Roberto B.

Abstract

In this paper, we present a less-explored channel through which health insurance impacts productivity: by offering health insurance, employers reduce the expected time workers spend out of work in sick days. Using data from the Medical Expenditure Panel Survey (MEPS), we show that a worker with health coverage misses on average 52% fewer workdays than uninsured workers, after controlling for endogeneity. We develop a model that embodies this impact of health coverage in productivity. In our model, health insurance reduces the probability that a healthy worker gets sick, missing workdays, and it increases the probability that a sick worker recovers and returns to work. In our model, firms that offer health insurance are larger and pay higher wages in equilibrium, a pattern observed in the data. We calibrated the model using US data for 2004 and show the impact of increases in health costs, as well as of changes in tax benefits of health insurance expenses, on labor force health coverage and productivity. Finally, we show that a government mandate that forces firms to offer health insurance increases average wages and aggregate productivity while reducing aggregate profits, ultimately having a positive impact on welfare.

Suggested Citation

  • Dizioli, Allan & Pinheiro, Roberto B., 2012. "Health insurance as a productive factor," MPRA Paper 39743, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:39743
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    References listed on IDEAS

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    Cited by:

    1. Hanming Fang & Naoki Aizawa, 2012. "Equilibrium Labor Market Search and Health Insurance Reform," 2012 Meeting Papers 959, Society for Economic Dynamics.
    2. McBain, Florence, 2014. "Health insurance and health environment: India’s subsidized health insurance in a context of limited water and sanitation services," Working Papers 179200, University of Bonn, Center for Development Research (ZEF).
    3. repec:eee:dyncon:v:79:y:2017:i:c:p:126-153 is not listed on IDEAS
    4. Ferreira, Pedro Cavalcanti & Gomes, Diego B.P., 2017. "Health care reform or more affordable health care?," Journal of Economic Dynamics and Control, Elsevier, vol. 79(C), pages 126-153.

    More about this item

    Keywords

    Health; Health Insurance; Labor Productivity; Labor Markets;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • I10 - Health, Education, and Welfare - - Health - - - General

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