Endogenous Fringe Benefits, Compensating Wage Differentials and Older Workers

  • Gail A. Jensen
  • Michael A. Morrisey


Employers are the principal source of health insurance for Americans under age 65. Economic theory argues that workers pay for health insurance in the form of lower wages or reductions in other forms of compensation. This paper uses 1994 and 1998 Health and Retirement Survey data to examine the wage-health insurance trade-off for older U.S. workers. Job and insurance choice are treated as endogenous in a two stage least squares framework. There is strong evidence supporting the treatment of nonwage benefits as endogenous. The preferred specification indicates an annual health insurance wage adjustment of $6,300. The magnitude of the trade-off is fragile, however.

health insurance compensating differentials 


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Copyright information

© Kluwer Academic Publishers 2001

Authors and Affiliations

  • Gail A. Jensen
    • 1
  • Michael A. Morrisey
    • 2
  1. 1.Institute of Gerontology and Department of EconomicsWayne State UniversityUSA
  2. 2.Lister Hill Center for Health PolicyUniversity of AlabamaBirmingham

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