Health insurance and labor market outcomes: Joint decision-making within households

Anne Beeson Royalty, Jean M. Abraham

Research output: Contribution to journalArticlepeer-review

20 Scopus citations

Abstract

Most Americans obtain access to health insurance through an employer. In this paper, we ask how the link between health insurance and employment affects labor market choices such as whether to work full-time. To understand the effect of the incentives embedded in the employer-based insurance system, we study the joint decision-making of husbands and wives that determines the household's access to health insurance. We estimate the effect on a wife's (husband's) labor market outcomes of husband's (wife's) health insurance, allowing the health insurance of both spouses to be endogenous. Obtaining unbiased estimates of such effects is complicated by the likelihood that positive assortative mating creates correlations between a couple's characteristics and the possibility that there are important unobservable household income effects. Our innovation is to measure these biases by examining a second fringe benefit, paid sick leave, in addition to health insurance. We find that, as predicted, spouse's insurance has statistically significant negative effects on being offered own employer insurance as well as on the probability of working full-time with health insurance.

Original languageEnglish (US)
Pages (from-to)1561-1577
Number of pages17
JournalJournal of Public Economics
Volume90
Issue number8-9
DOIs
StatePublished - Sep 2006

Bibliographical note

Funding Information:
This paper was prepared for the conference, “Employee Benefits and Two-Earner Households”, sponsored by the U.S. Department of Labor on May 7, 2004. We thank the U.S. Department of Labor and the Robert Wood Johnson Foundation's ERIU Initiative for providing financial support. We would also like to thank Laurence Baker, Rebecca Blank, Jon Christianson, Helen Levy, seminar participants from the “Consumer Preferences and Coverage Choices” conference and the IHEA 5th World Congress, and two anonymous referees for their helpful advice. The views expressed are solely the authors' and the usual caveat applies.

Copyright:
Copyright 2006 Elsevier B.V., All rights reserved.

Keywords

  • Assortative mating
  • Employer-based health insurance
  • Full-time employment
  • Labor force participation

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