Dynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence

TitleDynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence
Publication TypeJournal Article
Year of Publication2011
AuthorsFang, H, Gavazza, A
JournalThe American Economic Review
Volume101
Issue7
Pagination3047
KeywordsEmployment and Labor Force, Event History/Life Cycle, Healthcare, Medicare/Medicaid/Health Insurance, Methodology, Net Worth and Assets, Other, Pensions
Abstract

We investigate the effects of the institutional settings of the US health care system on individuals' life-cycle medical expenditures. Health is a form of general human capital; labor turnover and labor-market frictions prevent an employer-employee pair from capturing the entire surplus from investment in an employee's health. Thus, the pair underinvests in health during working years, thereby increasing medical expenditures during retirement. We provide empirical evidence consistent with the comparative statics predictions of our model using the Medical Expenditure Panel Survey (MEPS) and the Health and Retirement Study (HRS). Our estimates suggest significant inefficiencies in health investment in the US. (JEL D14, D91, G22, I11, J32) PUBLICATION ABSTRACT

URLhttp://proquest.umi.com.proxy.lib.umich.edu/pqdweb?did=2535185341andFmt=7andclientId=17822andRQT=309andVName=PQD
Endnote Keywords

Studies/Health care expenditures/Economic theory/Life cycles/Life cycles/Economic models/Health insurance/Employee benefits/Labor market/Human capital

Endnote ID

62794

Citation Key7660