Interindustry Differentials in Health Coverage and Dynamic Employment Substitution

Abstract

Using data on the U.S., we study the effects of employer-provided health insurance on dynamic employment substitution between 1990 and 2007 by exploiting the interindustry variation in health care coverage. We find that industries with a high health benefit structure in 1990 have experienced slower employment growth of part-time workers relative to full-time workers, in particular part-time routine workers, while the relative wage of part-time to full-time workers and capital per worker have increased more in such industries. We suggest that this can be explained as firms’ and workers’ optimal responses to the benefit structure.

Keywords: Employer-provided health insurance; Employment substitution; Part-time employment; Routine occupation; Labor supply and demand

JEL Classification: I13, J21, J22, J23, J32