Steve Deloach, professor of economics, and Jennifer Platania, associate professor of economics, recently had their paper “The macroeconomic consequences of financing health insurance” published.
Their research shows that the U.S.’s current system of financing health insurance primarily through employers lowers Gross Domestic Product by encouraging firms to hire workers for longer hours rather than hiring more workers. It also shows that several options for financing health insurance costs are superior to the U.S’s current system.
Below is an abstract:
Employer-financed health insurance systems like those used in the United States distort firms’ labor demand and adversely affect the economy. Since such costs vary with employment rather than hours worked, firms have an incentive to increase output by increasing worker hours rather than employment. Given that the returns to employment exceed the returns to hours worked, this results in lower levels of employment and output. In this paper, we construct a heterogeneous agent general equilibrium model where individuals differ with respect to their productivity and employment opportunities. Calibrating the model to the U.S. economy, we generate steady state results for several alternative models for financing health insurance: one in which health insurance is financed primarily through employer contributions that vary with employment, a second where insurance is funded through a non-distortionary, lump-sum tax, and a third where insurance is funded by a payroll tax. We measure the effects of each of the alternatives on output, employment, hours worked, and wages.
The International Advances in Economic Research is an official publication of the International Atlantic Economic Society. It provides the latest research on today’s economic policies and tomorrow’s economic and financial conditions. Contributors include economists, financial specialists and scholars in related disciplines from around the world.