Health Care Costs and Corporate Investment

97 Pages Posted: 28 Dec 2020 Last revised: 11 Oct 2023

See all articles by (Joy) Tianjiao Tong

(Joy) Tianjiao Tong

Ivey Business School, Western University

Date Written: October 12, 2020


Health care costs for U.S. employers have tripled over the past 20 years. Using firm-specific health expense data, I show that firms negatively adjust capital expenditures and R&D expenses in response to increases in health care costs. The effects are more pronounced for firms that are financially constrained, employ more high-skilled workers, and have less bargaining power relative to insurers. Furthermore, policy uncertainty surrounding health care costs is substantial and discourages capital investment. These findings suggest that an elevated level of health care costs and the associated uncertainty limit a firm's ability to expand physically or through innovation.

Keywords: Investment; Healthcare; Insurance; Non-wage benefits; Health care policy uncertainty

JEL Classification: J32, G31, I11

Suggested Citation

Tong, (Joy) Tianjiao, Health Care Costs and Corporate Investment (October 12, 2020). Available at SSRN: or

(Joy) Tianjiao Tong (Contact Author)

Ivey Business School, Western University ( email )

1151 Richmond Street
London, Ontario N6A 5B8

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