NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Alessandro Gavazza

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Working Papers

September 2007Dynamic Inefficiencies in Employment-Based Health Insurance System Theory and Evidence
with Hanming Fang: w13371
We investigate how the employment-based health insurance system in the U.S. affects individuals' life-cycle health-care decisions. We take the viewpoint that health is a form of human capital that affects workers' productivities on the job, and derive implications of employees' turnover on the incentives to undertake health investment. Our model suggests that employee turnovers lead to dynamic inefficiencies in health investment, and particularly, it suggests that employment-based health insurance system in the U.S. might lead to an inefficient low level of individual health during individuals' working ages. Moreover, we show that under-investment in health is positively related to the turnover rate of the workers' industry and increases medical expenditure in retirement. We provide empiri...

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