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Employment-based health insurance and aggregate labor supply

Zhigang Feng and Kai Zhao ()

Journal of Economic Behavior & Organization, 2018, vol. 154, issue C, 156-174

Abstract: We study the impact of the U.S. employment-based health insurance system on the employment rate, the shares of full-time/part-time workers, and aggregate hours worked in a general equilibrium life cycle model with incomplete markets and idiosyncratic risks in both income and medical expenses. In contrast to most Europeans, who get universal health insurance from the government, most working-age Americans get health insurance through their employers. We find that the employment-based health insurance system provides Americans with an extra incentive to work and work full-time. In a calibrated version of the model, we assess the extent to which the different health insurance systems account for the differences in employment rate and full-time/part-time shares of workers between the U.S. and European countries. Our quantitative results suggest that the different health insurance systems can account for a significant fraction of the differences in employment rate and full-time/part-time shares of workers between the two regions. In addition, we find that the employment-based health insurance system is one of the reasons why many Americans work more than Europeans.

Keywords: Labor supply; Employment-based health insurance; General equilibrium (search for similar items in EconPapers)
JEL-codes: E20 E60 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Employment-Based Health Insurance and Aggregate Labor Supply (2015) Downloads
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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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