Health Insurance as a Productive Factor
44 Pages Posted: 9 Oct 2010
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
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