Working Paper: NBER ID: w19771
Authors: Casey B. Mulligan; Trevor S. Gallen
Abstract: Our paper documents the large labor market wedges created by taxes, subsidies, and regulations included in the Affordable Care Act. The law changes terms of trade in both goods and factor markets for firms offering health insurance coverage. We use a multi-sector (intra-national) trade model to predict and quantify consequences of the Affordable Care Act for the patterns of output, labor usage, and employee compensation. We find that the law will significantly redistribute from high-wage workers to low-wage workers and to non-workers, reduce total factor productivity about one percent, reduce per-capita labor hours about three percent (especially among low-skill workers), reduce output per capita about two percent, and reduce employment less for sectors that ultimately pay employer penalties.
Keywords: Affordable Care Act; labor market; productivity; wages; health insurance
JEL Codes: H3; I13; J2; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Affordable Care Act (ACA) (G52) | Redistribution of wages from high-wage to low-wage workers and nonworkers (J31) |
| Affordable Care Act (ACA) (G52) | Labor market wedges (J29) |
| Labor market wedges (J29) | Redistribution of wages from high-wage to low-wage workers and nonworkers (J31) |
| Affordable Care Act (ACA) (G52) | Total factor productivity (O49) |
| Distortion of labor market incentives (H31) | Total factor productivity (O49) |
| Affordable Care Act (ACA) (G52) | Per capita labor hours (J89) |
| Decrease in per capita labor hours (J29) | Labor supply (J22) |
| Affordable Care Act (ACA) (G52) | Employment rates (J68) |