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Health Insurance and the Labor Market: Theory and Experimental Design

Health Insurance and the Labor Market: Theory and Experimental Design. Katya Sherstyuk Yoav Wachsman Jerry Russo The Hawaii Coverage for All Project Technical Workshop 02/07/03. Health Insurance and the Labor Market: Motivation.

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Health Insurance and the Labor Market: Theory and Experimental Design

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  1. Health Insurance and the Labor Market: Theory and Experimental Design Katya Sherstyuk Yoav Wachsman Jerry Russo The Hawaii Coverage for All Project Technical Workshop 02/07/03

  2. Health Insurance and the Labor Market: Motivation • Aim to study the effects of health insurance regulations on labor markets • Specifically, focus on the effect of 20-hour per week threshold rule for providing insurance: • Does the rule lead to market distortions and inefficiencies? (Distortion: e.g., employers may hire too few workers, or hire workers not best fitted for the job) • If yes, what alternatives would reduce/eliminate these distortions?

  3. Health Insurance and the Labor Market: Theory • Rosen (1986): • Perfectly competitive labor markets, no wage rigidities => => no distortionary effects of health insurance on labor markets: lower wages, same employment • Market imperfections and wage rigidities => => distortions: “job locks” and “employment locks” • Summers (1989): mandated health insurance benefits avoid the deadweight loss of public (tax-financed) provision

  4. Theory continued • Gruber (2001): mandates can be seen as an increases in health insurance costs • For employers, increased fixed costs => will desire increased hours by fewer workers; • Workers: will increase demand for part-time work • Mandates with a threshold 20-hour employment rule are unique to Hawaii, not discussed in the literature • We conjecture that such mandates may lead to distortions: • if worker productivities differ, efficiency may requires hiring the most productive workers full-time • Instead, employers will seek more fractional workers to save on the cost of insurance

  5. Health Insurance and the Labor Market: Experimental Design • Simulate competitive labor markets with many firms and workers • Each worker has several (2) units of labor to sell • Worker differ in their labor productivity • Consider four treatments: • Employers do not have to offer heath insurance • Employers have to provide full health insurance for each worker they hire, either part- or full-time • Employers have to provide full health insurance to full-time workers, but not to part-time workers • Employers have to provide health insurance benefits in proportion to number of hours hired

  6. Proposed analysis of experimental results • Consider which institution leads to highest efficiency, i.e., minimizes distortions • Given the findings, change the design to make the settings more realistic • Policy implications…

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