The Social Externality of Health Insurance: Evidence from Unemployment Insurance Generosity and Children Mortality

Abstract

This paper explores the potential health externality of an important social program in the US, the Unemployment Insurance (UI) program. Exploiting the variations of UI benefits across states and over the years 1970-2000 and applying a difference-in-difference-in-difference identification strategy, we find that UI benefits have the potential to reduce child mortality rates. Among mothers fully eligible for the UI benefits compared to non-eligible mothers, a $1,000 increase in maximum benefit is associated with 5.3 and 0.24 fewer deaths per 1,000 infants and toddlers, respectively. The effects are robust across various specifications, subsamples, and alternative measures of UI benefits. The results do not appear to be driven by the compositional changes in states’ welfare programs or the endogenous economic indicators that cause the changes in UI laws. The potential mechanisms of impact are improved birth outcomes and better prenatal care during pregnancy. Some policy implications are discussed.