Effects of health insurance on labour supply: A systematic review

Nga T. Q. Le, Wim Groot, Sonila Tomini & Florian Tomini

#2017-017

This study provides a systematic review of empirical evidence on the labour supply effects of health insurance. The outcomes in the 63 studies reviewed include labour supply in terms of hours worked and the probability of employment, self-employment and the level of economic formalisation. One of the key findings is that the current literature is vastly concentrated on the US. We show that spousal coverage in the US is associated with reduced labour supply of secondary earners. The effect of Medicaid in the US on labour supply of its recipients is ambiguous. However we have initial evidence of labour supply distortion caused by Children's Health Insurance Program, Affordable Care Act and other public health insurance expansions. A tentative result is that dependent young adults in the US who can access health insurance via their parents' employer have lower labour supply through fewer hours worked while keeping the same employment probability. The employment-coverage link is an important determinant of labour supply of people with health problems. The same holds for self-employment decisions. Universal coverage may create either an incentive or a disincentive to work depending on the design of the system. Finally, evidence on the relationship between health insurance and the level of economic formalisation in developing countries is fragmented and limited.

Keywords: health insurance, labour supply, labour market

JEL Classification: I13, J22