Employer-provided health insurance and equilibrium wages with two-sided heterogeneity

Arnaud Chéron (), Jérôme Ronchetti () and Pierre-Jean Messe ()
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Arnaud Chéron: GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université
Jérôme Ronchetti: GATE - Health System Analysis Laboratory - Université de Lyon
Pierre-Jean Messe: LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université

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Abstract: This paper develops an equilibrium search model that allows firms to invest in worker's health. Heterogeneous health endowment of the employee is not observed by the employer, and firms also differ regarding their productivity. We emphasize that wage and health expenditure policies of the employer are tightly related, and show how those policies relate to firms' type. A noticeable implication is that there is an ambiguous relationship between firm's type, wages and health expenditures. 1 As emphasized by Aizawa and Fang (2013), it is the case for 90% of the workers. 2 See Madrian (1994) for a seminal paper. 3 We will discuss in the end of the paper the potential implications of considering a continuum of health status rather than only two.

Date: 2014-12
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Published in Economics Bulletin, 2014, 35 (2), pp.1109-1117

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