DDD Model: Effect of Mandated Benefits on Coverage Rates and Wages

[eldreddyl]

Baseline Model

• The goal of this project is to analyze the effect of mandated health benefits on labor market outcomes
• Topic is influenced by Simon (2001) and Gruber (1994)
  • Simon (2001) looks at the effects of Small Group Health Insurance on coverage rates
    • In the early 1990s, millions of Americans were uninsured. Workers in small firms (<25 workers) were disproportionally less likely to have health insurance through their employer
    • Simon believes this is due to industry redlining - where insurance providers deny access to coverage to certain industries that they deem "high risk"
    • Statewide insurance reform dropped several barriers to coverage
    • Despite increased access, Simon found that coverage rates actually decreased
    • She theorizes this is due to adverse selection - due to asymmetric information, high risk individuals drive out the low risk individuals
  • Gruber (1994) explores the effect of mandatory benefits on wages
    • Theory predicts that offering benefits, such as health insurance, is associated with a decrease in wage so long as the workers value that benefit more than its cost to the firm
    • Gruber took an easily identifiable group, women of childbearing age, and analyzed the effects of mandatory maternity benefits on their wages
    • Using a DDD model, he identifies women ages 20 to 40 as the treatment group. He then compares the mean wages between the control group (men, women with ages > 40 ) before and after the reform
    • Gruber found that mandating maternity benefits was associated with a decrease in wage for the control group

The goal of my model is to:

1. Run a regression to estimate the effect of mandated benefits on coverage rates for workers in risky occupations*

   • Simon's paper found that broad coverage rates decreased
   • In line with Gruber's paper, I'm expecting coverage rates to increase for the subgroup of risky workers

2. If coverage rates among the subgroup increases, analyze the extent to which those workers value the benefits by estimating the effect on wages

• Based on Gruber's findings, I expect wages to decrease

*risky occupations is defined in the model as working a job whose fatality rate is above the median.