Equilibrium Labor Market Search and Health Insurance Reform

62 Pages Posted: 12 Jan 2013

See all articles by Naoki Aizawa

Naoki Aizawa

University of Wisconsin-Madison Department of Economics

Hanming Fang

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

Multiple version iconThere are 3 versions of this paper

Date Written: January 2013

Abstract

We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers' health compositions. We estimate our model by Generalized Method of Moments using a combination of micro data sources including Survey of Income and Program Participation (SIPP), Medical Expenditure Panel Survey (MEPS) and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from 20.12% to 7.27%. We also examine a variety of alternative policies to understand the roles of different components of the ACA in contributing to these equilibrium changes. Interestingly, we find that the uninsured rate will be even lower (at 6.44%) if the employer mandate in the ACA is eliminated.

Suggested Citation

Aizawa, Naoki and Fang, Hanming, Equilibrium Labor Market Search and Health Insurance Reform (January 2013). NBER Working Paper No. w18698, Available at SSRN: https://ssrn.com/abstract=2199774

Naoki Aizawa (Contact Author)

University of Wisconsin-Madison Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706-1393
United States

Hanming Fang

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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