Before concluding, it is worth emphasizing that there is an important conceptual difference
between the estimates of the crowdout effect reported in this paper and those reported
in the existing literature. The welfare reform legislation changed the eligibility rules for
immigrants in many public assistance programs. As a result, this study addresses a question
that is related to, but different from, the question usually addressed in the crowdout literature.
In particular, existing studies attempt to determine if increased availability of publicly
provided health insurance encourages persons to leave the private insurance system and
enroll in Medicaid. In contrast, my analysis examines if generalized cutbacks in public
assistance encourage individuals to alter their behavior along many margins, particularly
labor supply. My evidence indicates that the net outcome of all of these responses is a
substantial increase in the probability that individuals are covered by employer-sponsored
health insurance. It should not then be surprising that my estimates of the crowdout effect
are larger than the estimates found in the existing literature.
Although it would be of great interest to isolate the contribution of the cutbacks in the
various public assistance programs to the estimated crowdout effect, such an analysis is
empirically difficult because there is a great deal of “jointness” in program participation:
94.0% of persons who receive cash benefits and 67.1% of those who receive food stamps
are also enrolled in Medicaid. As a result, it is unlikely that the immigrant restrictions in
PRWORA can help identify the separate effects
Before concluding, it is worth emphasizing that there is an important conceptual differencebetween the estimates of the crowdout effect reported in this paper and those reportedin the existing literature. The welfare reform legislation changed the eligibility rules forimmigrants in many public assistance programs. As a result, this study addresses a questionthat is related to, but different from, the question usually addressed in the crowdout literature.In particular, existing studies attempt to determine if increased availability of publiclyprovided health insurance encourages persons to leave the private insurance system andenroll in Medicaid. In contrast, my analysis examines if generalized cutbacks in publicassistance encourage individuals to alter their behavior along many margins, particularlylabor supply. My evidence indicates that the net outcome of all of these responses is asubstantial increase in the probability that individuals are covered by employer-sponsoredhealth insurance. It should not then be surprising that my estimates of the crowdout effectare larger than the estimates found in the existing literature.Although it would be of great interest to isolate the contribution of the cutbacks in thevarious public assistance programs to the estimated crowdout effect, such an analysis isempirically difficult because there is a great deal of “jointness” in program participation:94.0% of persons who receive cash benefits and 67.1% of those who receive food stamps
are also enrolled in Medicaid. As a result, it is unlikely that the immigrant restrictions in
PRWORA can help identify the separate effects
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