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Labor Supply Responses to Employer-Provided Health Insurance

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  • Mayer, Rebecca
  • Orazem, Peter F.
  • Wachenheim, William A.

Abstract

Variation in income tax policies and health insurance costs are shown to be theoretically appropriate instruments to identify endogenous firm wage and benefit offers in a labor supply model. Empirical results show that firms are more likely to provide health insurance benefits in states with high marginal income tax rates and low hospitalization costs. The model implies that over the 1983-1995 period, large increases in health insurance costs and reductions in marginal income tax rates lowered the probability of receiving health insurance benefits from employers by 10 percentage points. This decrease in benefits lowered hours of labor supply by 4-7%.

Suggested Citation

  • Mayer, Rebecca & Orazem, Peter F. & Wachenheim, William A., 2002. "Labor Supply Responses to Employer-Provided Health Insurance," ISU General Staff Papers 200204010800001219, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200204010800001219
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    References listed on IDEAS

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