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http://ssrn.com/abstract=3157
 
 

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Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked


David M. Cutler


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Brigitte C. Madrian


Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

April 1996

NBER Working Paper No. w5525

Abstract:     
Increases in the cost of providing health insurance must have some effect on labor markets, either in lower wages, changes in the composition of employment, or both. Despite a presumption that most of this effect will be in the form of lower wages, we document in this paper a significant effect on work hours as well. Using data from the CPS and the SIPP, we show that rising health insurance costs over the 1980s increased the hours worked of those with health insurance by up to 3 percent. We argue that this occurs because health insurance is a fixed cost, and as it becomes more expensive to provide, firms face an incentive to substitute hours per worker for the number of workers employed.

Number of Pages in PDF File: 45

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Date posted: May 10, 1998  

Suggested Citation

Cutler, David M. and Madrian, Brigitte C., Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked (April 1996). NBER Working Paper No. w5525. Available at SSRN: http://ssrn.com/abstract=3157

Contact Information

David M. Cutler (Contact Author)
Harvard University - Department of Economics ( email )
Littauer Center, Room 315A
Cambridge, MA 02138
United States
617-496-5216 (Phone)
617-495-8570 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3900 (Phone)
617-868-2742 (Fax)
Brigitte Madrian
Harvard University - Harvard Kennedy School (HKS) ( email )
79 John F. Kennedy Street
Cambridge, MA 02138
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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