Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 6/18: The Value of Health Insurance: A Household Job Search Approach

Gabriella Conti (), Rita Ginja () and Renata Narita ()
Additional contact information
Gabriella Conti: University College London, Department of Economics
Rita Ginja: University of Bergen, Department of Economics, Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Renata Narita: University of São Paulo, Department of Economics

Abstract: Do households value access to free health insurance when making labor supply decisions? We answer this question using the introduction of universal health insurance in Mexico, the Seguro Popular (SP), in 2002. The SP targeted individuals not covered by Social Security and broke the link between access to health care and job contract. We start by using the rollout of SP across municipalities in a differences-indifferences approach, and find an increase in informality of 4% among low-educated families with children. We then develop and estimate a household search model that incorporates the pre-reform valuation of formal sector amenities relative to the alternatives (informal sector and non-employment) and the value of SP. The estimated value of the health insurance coverage provided by SP is below the government’s cost of the program, and the corresponding utility gain is, at most, 0.56 per each peso spent.

Keywords: Search; Household behavior; Health insurance; Informality; Unemployment

JEL-codes: D10; I13; J46; J64

67 pages, July 26, 2018

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