"Labor Market Effects of Employer-Provided Health Insurance"
Ekaterina Sherstyuk (joint with Yoav Wachsman and Gerard Russo)
University of Hawai'i at Manoa
Abstract
Increasing health insurance coverage is arguably an important policy goal. Most individuals who have health insurance in the US obtain it through their employer. In some states the government mandates require employers to provide insurance to all full-time workers. We investigate possible effects of alternative health insurance regulations on the labor market performance. Theory predicts that in perfectly competitive labor markets health insurance creates no distortionary effects as long as the coverage is not mandated and there are no wage rigidities. We compare performances of experimental labor markets under several policy scenarios: (1) no insurance mandate; (2) insurance coverage is mandated for full-time workers, but not part-time workers (partial mandate); (3) insurance is mandated for all workers (full mandate). The actual performance is compared to the corresponding theoretical predictions and to the first best (fully efficient) outcome. Consistent with the theory, we find that the full mandate creates labor market distortions; whereas the partial mandate leads to increased number of part-time workers but does not necessarily reduce efficiency.