Worker Sorting, Taxes and Health Insurance Coverage / Kevin Lang, Hong Kang.

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Lang, Kevin

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w13066.Publication details: Cambridge, Mass. National Bureau of Economic Research 2007.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We develop a model in which firms hire heterogeneous workers but must offer all workers insurance benefits under similar terms. In equilibrium, some firms offer free health insurance, some require an employee premium payment and some do not offer insurance. Making the employee contribution pre-tax lowers the cost to workers of a given employee premium and encourages more firms to charge. This increases the offer rate, lowers the take-up rate, increases (decreases) coverage among high (low) demand groups, with an indeterminate overall effect. We test the model using the expansion of section 125 plans between 1987 and 1996. The results are generally supportive.

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Previous	nber w13063 Determinants of Firm Boundaries: Empirical Analysis of the Japanese Auto Industry from 1984 to 2002 /	nber w13064 Wage and Labor Mobility in Denmark, 1980-2000 /	nber w13065 From Farming to International Business: The Social Auspices of Entrepreneurship in a Growing Economy /	nber w13066 Worker Sorting, Taxes and Health Insurance Coverage /	nber w13067 Liquidity Constraints and Imperfect Information in Subprime Lending /	nber w13068 What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns /	nber w13069 Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration /	Next

April 2007.

We develop a model in which firms hire heterogeneous workers but must offer all workers insurance benefits under similar terms. In equilibrium, some firms offer free health insurance, some require an employee premium payment and some do not offer insurance. Making the employee contribution pre-tax lowers the cost to workers of a given employee premium and encourages more firms to charge. This increases the offer rate, lowers the take-up rate, increases (decreases) coverage among high (low) demand groups, with an indeterminate overall effect. We test the model using the expansion of section 125 plans between 1987 and 1996. The results are generally supportive.