Journal article
Employment-based health insurance and misallocation: Implications for the macroeconomy
Review of economic dynamics, Vol.23, pp.125-149
01/2017
DOI: 10.1016/j.red.2016.09.002
Abstract
Most working-age Americans obtain health insurance through the workplace. U.S. law requires employers to use a common price, but the value of insurance varies with idiosyncratic health risk. Hence, linking employment and health insurance creates a wedge between the marginal cost and benefit of insurance. We study the impact of this wedge on occupational choice and welfare in a general equilibrium model. Agents face idiosyncratic health expenditure shocks, have heterogeneous managerial and worker productivity, and choose whether to be workers or entrepreneurs. First, we consider a private insurance indemnity policy that removes the link between employment and health insurance, so only ability matters for occupational choice. By construction, this is the most efficient policy. We find a welfare gain of 2.28% from decoupling health insurance and employment. Second, we tighten the link by increasing employment-based health insurance from the current U.S. level of 62% to 100%, and find a welfare loss of – 0.61%.
Details
- Title: Subtitle
- Employment-based health insurance and misallocation: Implications for the macroeconomy
- Creators
- David ChiversZhigang FengAnne Villamil
- Resource Type
- Journal article
- Publication Details
- Review of economic dynamics, Vol.23, pp.125-149
- DOI
- 10.1016/j.red.2016.09.002
- ISSN
- 1094-2025
- eISSN
- 1096-6099
- Language
- English
- Date published
- 01/2017
- Academic Unit
- Economics
- Record Identifier
- 9984083868302771
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