Health-Care Reform or Labor Market Reform? A Quantitative Analysis of the Affordable Care Act

66 Pages Posted: 19 Sep 2015

See all articles by Makoto Nakajima

Makoto Nakajima

Federal Reserve Bank of Philadelphia

Didem Tuzemen

Federal Reserve Bank of Kansas City

Date Written: February 19, 2016

Abstract

An equilibrium model with firm and worker heterogeneity is constructed to analyze labor market and welfare implications of the Patient Protection and Affordable Care Act, commonly called the Affordable Care Act (ACA). The authors’ model implies a significant reduction in the uninsured rate from 22.6 percent to 5.6 percent. The model predicts a moderate positive welfare gain from the ACA because of the redistribution of income through health insurance subsidies at the exchange as well as the Medicaid expansion. About 2.1 million more part-time jobs are created under the ACA at the expense of 1.6 million full-time jobs, mainly because the link between full-time employment and health insurance is weakened. The model predicts a small negative effect on total hours worked (0.36 percent), partly because of the general equilibrium effect.

Keywords: Health Insurance, Health-Care Reform, Affordable Care Act, Labor Market, Heterogeneous Agents

JEL Classification: D91, E24, E65, I10

Suggested Citation

Nakajima, Makoto and Tuzemen, Didem, Health-Care Reform or Labor Market Reform? A Quantitative Analysis of the Affordable Care Act (February 19, 2016). FRB of Philadelphia Working Paper No. 15-34/R, Available at SSRN: https://ssrn.com/abstract=2662438 or http://dx.doi.org/10.2139/ssrn.2662438

Makoto Nakajima (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Didem Tuzemen

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

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