Mandate-Based Health Reform and the Labor Market:� Evidence from the Massachusetts Reform

Jonathan T. Kolstad and Amanda Kowalski
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Jonathan T. Kolstad: Wharton School, University of Pennsylvania

No 1855, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We model the labor market impact of the three key provisions of the recent Massachusetts and national "mandate-based" health reforms: individual and employer mandates and expansions in publicly-subsidized coverage. Using our model, we characterize the compensating differential for employer-sponsored health insurance (ESHI) -- the causal change in wages associated with gaining ESHI. We also characterize the welfare impact of the labor market distortion induced by health reform. We show that the welfare impact depends on a small number of sufficient statistics" that can be recovered from labor market outcomes. Relying on the reform implemented in Massachusetts in 2006, we estimate the empirical analog of our model. We find that jobs with ESHI pay wages that are lower by an average of $6,058 annually, indicating that the compensating differential for ESHI is only slightly smaller in magnitude than the average cost of ESHI to employers. Because the newly-insured in Massachusetts valued ESHI, they were willing to accept lower wages, and the deadweight loss of mandate-based health reform was less than 5% of what it would have been if the government had instead provided health insurance by levying a tax on wages.

Keywords: Individual mandate; Employer mandate; Health reform; Labor market (search for similar items in EconPapers)
JEL-codes: I11 I28 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2012-03
New Economics Papers: this item is included in nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Published in Journal of Health Economics (May 2016), 47: 81-106

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