Health Insurance as a Productive Factor

44 Pages Posted: 9 Oct 2010

See all articles by Roberto Pinheiro

Roberto Pinheiro

Federal Reserve Bank of Cleveland

Allan Dizioli

IMF; University of Pennsylvania - Department of Economics

Date Written: October 9, 2010

Abstract

In this paper, we present an additional channel through which health insurance impacts productivity: by offering health insurance, employers reduce the expected time workers spend out of work in sick days. We develop a model that embodies this impact of health coverage in productivity. In our model, offering health insurance has an impact on the probability that a worker gets sick, missing workdays, as well as the probability that he recovers and gets back to work. Through this framework, we match several features empirically observed about the connection between labor market and health insurance coverage: Companies that offer health insurance will be larger in equilibrium, as well as they will offer a higher wage. We calibrated the model using US data for 2004 and show that an increase of 10% in health insurance premium generates a reduction of 11:65% in the proportion of worker with health coverage, as well as an increase in the measure of sick workers in steady state by 6:14%. We also showed that investments on preventive medicine has a larger impact on health coverage and the fraction of sick workers in equilibrium than curative medicine. Finally, using data from the Household Component of the Medical Expenditure Panel Survey (MEPS) we found evidence supporting our hypothesis that health insurance reduces the number of sick days a worker needs.

Keywords: Health,Health Insurance, Labor Market, Labor Mobility

JEL Classification: E20, E24, E25, E62, I10, J32, J63, J78

Suggested Citation

Pinheiro, Roberto and Dizioli, Allan, Health Insurance as a Productive Factor (October 9, 2010). Available at SSRN: https://ssrn.com/abstract=1689750 or http://dx.doi.org/10.2139/ssrn.1689750

Roberto Pinheiro (Contact Author)

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Allan Dizioli

IMF ( email )

700 19th Street NW
Washington, DC 20431
United States

University of Pennsylvania - Department of Economics ( email )

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

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