Health Insurance and the Labor Supply Decisions of Older Workers: Evidence from the U.S. Department of Veterans Affairs

Melissa Boyle and Joanna Lahey

No 801, Working Papers from College of the Holy Cross, Department of Economics

Abstract: This paper exploits a major mid-1990s expansion in the U.S. Department of Veterans Affairs health care system to provide evidence on the labor market effects of expanding health insurance availability. Using data from the Current Population Survey, we compare the labor market behavior of older veterans and non-veterans before and after the VA health benefits expansion to test the impact of public health insurance on labor supply. We find that older workers are significantly more likely to decrease work both on the extensive and intensive margins after receiving access to non-employer based insurance. Older workers are also more likely to leave self-employment, a result inconsistent with "job-lock" effects of employer-based insurance, but consistent with a positive income effect from new access to public insurance. Some relatively disadvantaged subpopulations, however, may increase their labor supply after gaining greater access to public insurance, consistent with complementary positive health effects of health care access for these groups. We conclude that this reform has affected employment and retirement decisions, and suggest that future moves toward universal coverage or expansions of Medicare are likely to have significant labor market effects. To illustrate, we calculate that as much as 10% of the difference in retirement rates in the US and Canada may be due to Canada's provision of universal health care.

Keywords: labor supply; job-lock; retirement; older workers; health insurance; VA; Medicare; veteran (search for similar items in EconPapers)
JEL-codes: I18 J2 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2008-01
New Economics Papers: this item is included in nep-age, nep-hea, nep-ias and nep-lab
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https://hcapps.holycross.edu/hcs/RePEc/hcx/HC0801-Boyle_VeteransInsurance.pdf (application/pdf)

Related works:
Working Paper: Health Insurance and the Labor Supply Decisions of Older Workers: Evidence from the U.S. Department of Veterans Affairs (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hcx:wpaper:0801

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