An equilibrium model of health insurance provision and wage determination

Matthew S. Dey, Christopher J. Flinn

    Research output: Contribution to journalReview articlepeer-review


    We investigate the effect of employer-provided health insurance on job mobility rates and economic welfare using a search, matching, and bargaining framework. In our model, health insurance coverage decisions are made in a cooperative manner that recognizes the productivity effects of health insurance as well as its nonpecuniary value to the employee. The resulting equilibrium is one in which not all employment matches are covered by health insurance, wages at jobs providing health insurance are larger (in a stochastic sense) than those at jobs without health insurance, and workers at jobs with health insurance are less likely to leave those jobs, even after conditioning on the wage rate. We estimate the model using the 1996 panel of the Survey of Income and Program Participation, and find that the employer-provided health insurance system does not lead to any serious inefficiencies in mobility decisions.

    Original languageEnglish (US)
    Pages (from-to)571-627
    Number of pages57
    Issue number2
    StatePublished - Mar 2005


    • Equilibrium models
    • Health insurance
    • Job mobility
    • Simulated maximum likelihood
    • Wage bargaining

    ASJC Scopus subject areas

    • Economics and Econometrics


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