Health insurance as a productive factor

• Empirically show that workers with health insurance miss 76:54% fewer work-days
• On-the-job search endogenizing the impact of health insurance on sick leaves
• In equilibrium, firms offering health insurance are larger and pay higher wages
• Calibrate the model and show impact of changes on taxes and insurance costs
• Preliminary results show that preventive care is better than curative care.

In this paper, we present a less-explored channel through which health insurance impacts productivity: by offering health insurance, employers reduce the expected time workers spend out of work in sick days. Using data from the Medical Expenditure Panel Survey (MEPS), we show that a worker with health coverage misses on average 76.54% fewer workdays than uninsured workers, after controlling for endogeneity. We develop a model that embodies this impact of health coverage in productivity. In our model, health insurance reduces the probability that a healthy worker gets sick, missing workdays, and it increases the probability that a sick worker recovers and returns to work. In our model, firms that offer health insurance are larger and pay higher wages in equilibrium, a pattern observed in the data. We calibrated the model using US data for 2004 and show the impact of increases in health costs, as well as of changes in tax benefits of health insurance expenses, on labor force health coverage and productivity.