Health insurance as a productive factor

Allan Dizioli and Roberto Pinheiro

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we present a less-explored channel through which health insurance impacts productivity: by offering health insurance, employers reduce the expected time workers spend out of work in sick days. Using data from the Medical Expenditure Panel Survey (MEPS), we show that a worker with health coverage misses on average 52% fewer workdays than uninsured workers, after controlling for endogeneity. We develop a model that embodies this impact of health coverage in productivity. In our model, health insurance reduces the probability that a healthy worker gets sick, missing workdays, and it increases the probability that a sick worker recovers and returns to work. In our model, firms that offer health insurance are larger and pay higher wages in equilibrium, a pattern observed in the data. We calibrated the model using US data for 2004 and show the impact of increases in health costs, as well as of changes in tax benefits of health insurance expenses, on labor force health coverage and productivity. Finally, we show that a government mandate that forces firms to offer health insurance increases average wages and aggregate productivity while reducing aggregate profits, ultimately having a positive impact on welfare.

Keywords: Health; Health Insurance; Labor Productivity; Labor Markets (search for similar items in EconPapers)
JEL-codes: E20 E24 E25 E62 I10 J32 J63 J78 (search for similar items in EconPapers)
Date: 2012-06-29
New Economics Papers: this item is included in nep-hea, nep-ias, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Health insurance as a productive factor (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39743

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