Equilibrium labor market effects of non-contributory health insurance schemes

• Grant number: 19/04705-5
• Support Opportunities: Scholarships abroad - Research
• Effective date (Start): July 10, 2019
• Effective date (End): January 09, 2020
• Field of knowledge: Applied Social Sciences - Economics - Economics of Human Resources
• Principal Investigator: Renata Del Tedesco Narita
• Grantee: Renata Del Tedesco Narita
• Host Investigator: Daniel Aaronson
• Host Institution: Faculdade de Economia, Administração e Contabilidade (FEA). Universidade de São Paulo (USP). São Paulo , SP, Brazil
• Research place: Federal Reserve Bank of Chicago, United States

Abstract

Universal health coverage is intended to protect individuals against health and financial consequences of adverse health events. Not all countries provide social health insurance and this is particularly an issue in developing economies where individuals often lack resources to purchase essential healthcare. Developing countries, for example, Peru, Colombia and Mexico have implemented such system in the past decade. Other countries like Brazil began implementation of SUS (Brazil's Universal Health Insurance) since 1988. In particular, México introduced Seguro Popular (SP) program in 2002, a non-contributory health insurance that was directed to half of the country's population, uncovered by social protection or employer-provided health insurances. To the extent that SP is a transfer to informal sector workers and the nonemployed, and a tax to formal sector workers, it may have changed the incentives for individuals to participate in the labor market and in which sector to work (formal or informal). Our goal is to study the impacts of SP on labor market. This is done by structurally estimating a labor market model that allows us to address three main questions (i) How much of the increase in informality in México is due to the introduction of non-contributory health insurance?, (ii) Do individuals value health insurance?, and (iii) What are the welfare impacts of increases in the value of non-contributory health insurance?. The model is fitted to the Mexican Employment data and used to simulate changes in welfare, employment, informality and wages of different non-contributory health insurance policies. Our preliminary estimates for Mexico indicate that the value of the health program to families is below the government's average costs of providing it. Not surprisingly, when we use the estimated model to simulate the introduction of SP program we find that it increases household informality by at the most 2%, which is comparable to our reduced-form estimate, 4%. In counterfactual scenarios in which we increase the valuation of the free health system, we find that large increases in the value of SP can raise informality and nonemployment of spouses, despite potential positive impacts on welfare. The aim of this research proposal is to (1) improve the research done for Mexico and (2) to carry out the study for Brazil, exploring the reform introduced by the Programa Saúde da Família (PSF). Since 1994, the PSF aimed to promote coverage of primary care services provided by the public system implemented across municipalities in the country. I will perform similar analysis as done for Mexico so we can compare Mexico and Brazil results. (AU)