Working Paper: NBER ID: w12951
Authors: Steven F. Lehrer; Nuno Sousa Pereira
Abstract: This article introduces an empirical strategy to the compensating differentials literature that i) allows both individual observed and unobserved characteristics to be rewarded differently in firms based on health insurance provision, and ii) selection to jobs that provide benefits to operate on both sides of the labor market. Estimates of this model are used to directly test empirical assumptions that are made with popular econometric strategies in the health economics literature. Our estimates reject the assumptions underlying numerous cross sectional and longitudinal estimators. We find that the provision of health insurance has influenced wage inequality. Finally, our results suggest there have been substantial changes in how displaced workers sort to firms that offer health insurance benefits over the past two decades. We discuss the implications of our findings for the compensating differentials literature.
Keywords: health insurance; wage inequality; displaced workers; compensating differentials
JEL Codes: I11; J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Health insurance provision (G52) | Wage inequality (J31) |
| Health insurance provision (G52) | Wage differentials (J31) |
| Need for health insurance (G52) | Job search behavior (J68) |
| Health insurance (I13) | Wage dispersion (J31) |
| Unobserved characteristics (C29) | Wage determination (J31) |