The Value of Health Insurance: A Household Job Search Approach

Do households value access to free health insurance when making labor supply decisions? We address

this question by exploiting the 2002 introduction of universal health insurance in Mexico (Seguro

Popular, SP), that broke the link between access to health care and job contract. Reduced-form estimates

show that SP increased informality among less educated families with children by 3.5%. We develop

and estimate a household search model that incorporates the value of formal sector amenities relative to

pre-reform alternatives, and the value of health insurance. Model estimates show that households value

SP by, at most, 1.33 per unit of net cost