Health insurance benefits as a labor marketfriction: Evidence from a quasi-experiment
This study examines whethersmall firms that offer health insurance to theiremployees have better performance outcomes. Eventhough health insurance is a costly investment for smallfirms, there has been scant strategy- and evidence-basedguidance for managers regarding the conditions that canrender investments in employee health ultimately worthwhile. The study analyzes data from 15,000 smallfirms in the United States and finds that offering healthinsurance when retaining and replacing workers byfirms is more difficult. Firms that offer health insurancealso have better worker retention, productivity, and profitability compared to firms that do not offer health insur-ance. The results suggest that investments in employee health and well-being may provide a competitive edge to firms, especially when labor market competition forworkers is high.
