Working Paper: NBER ID: w20371
Authors: Melissa A. Boyle; Joanna N. Lahey
Abstract: Measuring the overall impact of public health insurance receipt is important in an era of increased access to publicly-provided and subsidized insurance. Although government expansion of health insurance to older workers leads to labor supply reductions for recipients, there may be spillover effects on the labor supply of uncovered spouses. While theory predicts a decrease in overall household work hours, financial incentives such as credit constraints, target income levels, and the need for own health insurance suggest that spousal labor supply might increase. In contrast, complementarities of spousal leisure would predict a decrease in labor supply for both spouses. Utilizing a mid-1990s expansion of health insurance for U.S. veterans, we provide evidence on the effects of public insurance availability on the labor supply of spouses. Using data from the Current Population Survey and Health and Retirement Study, we employ a difference-in-differences strategy to compare the labor market behavior of the wives of older male veterans and non-veterans before and after the VA health benefits expansion. Our findings suggest that although household labor supply may decrease because of the income effect, wives' labor supply increases, suggesting that financial incentives dominate complementarities of spousal leisure. This effect is strongest for wives with lower education levels and lower levels of household wealth. Moreover, wives with employer-provided health insurance in the previous year remain on the job while those without increase their hours, suggesting incentives to retain or obtain health insurance. Finally, non-working wives enter the labor force, those who were working part-time increase their hours, and full-time "career" women are largely unaffected.
Keywords: public health insurance; labor supply; spillover effects; veterans affairs; difference-in-differences
JEL Codes: H42; I13; J14; J22; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| VA health benefits expansion (I19) | labor supply of wives (J49) |
| husbands receiving public health insurance (I13) | labor supply of wives (J49) |
| low education levels and household wealth (I24) | increase in labor supply of wives (J29) |
| lack of previous employer-provided health insurance (I13) | increase in hours and earnings of wives (J31) |
| financial incentives (M52) | increase in labor supply of wives (J29) |
| spousal leisure complementarities (D13) | decrease in labor supply of wives (J29) |