Abstract
This paper uses 1996 and 2001 Survey of Income and Program Participation to examine the evidence for compensating wage differentials associated with employer-provided health insurance (EHI) in the United States. The results provide no evidence of a tradeoff between wages and EHI coverage. On the other hand, the results do suggest that employees who work in states with income taxes are more likely to receive EHI than those in states without income taxes. Fixed effects, first differencing and instrumental variable estimation are used to address the potential ability bias and endogeneity problems in wage models with EHI as an independent variable. While both fixed effects and first-differencing estimation provide evidence of a positive relationship between wages and EHI, validity tests cast doubt on fixed effects estimation. Instrumental variable estimates, however, provide no evidence of a tradeoff in either direction.
Highlights
Employer-provided health insurance (EHI) is the primary type of insurance for most of the Americans
This study aims to contribute to the existing literature by empirically examining compensating wage differentials associated with EHI using the data from the Survey of Income and Program Participation (SIPP)
This study uses SIPP data to test compensating wage differentials associated with employer-provided health insurance
Summary
Employer-provided health insurance (EHI) is the primary type of insurance for most of the Americans. The non-pecuniary wage includes many aspects of a job; such as environment, location, how dangerous the work is, and all forms of benefits (vacation, pension, health insurance, etc.). An employee who chooses a job offering higher health insurance coverage does so at the expense of giving up a certain amount of pecuniary wage. The employer will pass at least a part of the cost of providing health insurance onto the employee in the form of a lower wage. If the employee has other sources of health insurance, such as obtaining health insurance through his spouse, she may value the health insurance less; the employer may bear some costs for providing the health insurance
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
