Document Type

Article

Publication Date

8-7-2018

Publication Title

Journal of Economic Behavior & Organization

Volume

154

Issue

October 2018

First Page

156

Last Page

174

Abstract

We study the impact of the U.S. employment-based health insurance system on the employment rate, the shares of full-time/part-time workers, and aggregate hours worked in a general equilibrium life cycle model with incomplete markets and idiosyncratic risks in both income and medical expenses. In contrast to most Europeans, who get universal health insurance from the government, most working-age Americans get health insurance through their employers. We find that the employment-based health insurance system provides Americans with an extra incentive to work and work full-time. In a calibrated version of the model, we assess the extent to which the different health insurance systems account for the differences in employment rate and full-time/part-time shares of workers between the U.S. and European countries. Our quantitative results suggest that the different health insurance systems can account for a significant fraction of the differences in employment rate and full-time/part-time shares of workers between the two regions. In addition, we find that the employment-based health insurance system is one of the reasons why many Americans work more than Europeans.

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©2018 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license. (http://creativecommons.org/licenses/by/4.0/)

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Funded by the University of Nebraska at Omaha Open Access Fund