Tax preferences for fringe benefits and workers' eligibility for employer health insurance

In this paper, I estimate the effect of the tax preference for employer-pro vided health insurance on the probability that an employee will be eligible for health insurance at work. I instrument for marginal tax rates with sta te-level state income tax rates and I control for unobservable state effect s that could be correlated with the state income tax instrument by comparin g the estimated tax effect on employer-provided health insurance, to the ta x effect on sick leave, a fringe benefit that does not enjoy any tax advant age. The size of the tax effect on health insurance eligibility is positive , as predicted, and is both statistically and economically significant. (C) 2000 Elsevier Science S.A.. All rights reserved.