Dr David Chivers david.chivers@durham.ac.uk
Associate Professor
Employment-based health insurance and misallocation: Implications for the macroeconomy
Chivers, D.; Feng, Z.; Villamil, A.
Authors
Z. Feng
A. Villamil
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%.
Citation
Chivers, D., Feng, Z., & Villamil, A. (2017). Employment-based health insurance and misallocation: Implications for the macroeconomy. Review of Economic Dynamics, 23, 125-149. https://doi.org/10.1016/j.red.2016.09.002
Journal Article Type | Article |
---|---|
Acceptance Date | Sep 3, 2016 |
Online Publication Date | Sep 9, 2016 |
Publication Date | Jan 1, 2017 |
Deposit Date | Mar 15, 2017 |
Publicly Available Date | Mar 9, 2018 |
Journal | Review of Economic Dynamics |
Print ISSN | 1094-2025 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 23 |
Pages | 125-149 |
DOI | https://doi.org/10.1016/j.red.2016.09.002 |
Public URL | https://durham-repository.worktribe.com/output/1390937 |
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http://creativecommons.org/licenses/by-nc-nd/4.0/
Copyright Statement
© 2016 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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