Spousal Labor Market Effects from Government Health Insurance: Evidence from a Veterans Affairs Expansion

Our findings suggest that although household labor supply may decrease
because of the income effect, the more flexible labor supply of wives allows the
wife’s labor supply to increase. This effect appears to dominate the propensity for
a wife to retire at the same time as her husband (which would imply a decrease in
work on the extensive margin). This outcome is stronger for wives with high
school education or less who are more likely than more educated women to seek
occupations with flexible work hours. When husbands obtain health insurance
independent of their jobs, wives with lower levels of education are more likely to
enter the labor force. Although women with more education do not significantly
increase their propensity to work on the extensive margin, they increase their
earnings and hours worked, suggesting an increase on the intensive margin.

The organization of the paper is as follows. Section II describes the VA
program. Section III gives a brief overview of the theoretical framework and the
data. Section IV provides results. Section V discusses and concludes.

II.    Description of VA Program

The Department of Veterans Affairs (VA) health care system was
established in the 1930s to treat veterans with conditions resulting from their
military service, and later, low-income veterans. Prior to the time period we
study, VA primarily provided inpatient care, and limited the availability of

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