Working Paper

Health-care reform or labor market reform? A quantitative analysis of the affordable care act

Abstract: An equilibrium model with firm and worker heterogeneity is constructed to analyze labor market and welfare implications of the Patient Protection and Affordable Care Act, commonly called the Affordable Care Act (ACA). The authors? model implies a significant reduction in the uninsured rate from 22.6 percent to 5.6 percent. The model predicts a moderate positive welfare gain from the ACA because of the redistribution of income through health insurance subsidies at the exchange as well as the Medicaid expansion. About 2.1 million more part-time jobs are created under the ACA at the expense of 1.6 million full-time jobs, mainly because the link between full-time employment and health insurance is weakened. The model predicts a small negative effect on total hours worked (0.36 percent), partly because of the general equilibrium effect.

Keywords: Health insurance; Health-care reform; Affordable care act; Labor market; Heterogeneous agents;

JEL Classification: D91; E24; E65; I10;

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Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2016-02-19

Number: 15-34

Pages: 57 pages