The Basic Health Plan (BHP) is an optional provision of the Affordable Care Act (ACA) that allows states to create a state-administered coverage program for low-income individuals. Only three states — New York, Minnesota, and Oregon — have adopted the BHP, providing extra coverage to individuals from 138% to 200% Federal Poverty Level (FPL). This paper asks what threshold a state should choose to maximize its welfare. Using New York State as a laboratory, I build a life-cycle heterogeneous-agent model with uninsurable labor, health, and employer-provided insurance risk, endogenous insurance choice, and rich household heterogeneity --- including marriage, divorce, and fertility --- to characterize the welfare-maximizing BHP eligibility threshold. Calibrated to New York State in the early 2020s, the model implies a welfare-maximizing threshold of 370% FPL, well above the current 200% cutoff, delivering a consumption-equivalent welfare gain of 1.3% relative to the status quo. The fiscal cost for the state government is modest: the state consumption tax rate rises by nearly one percentage point, since the BHP's 95% federal block grant absorbs most of the cost that would otherwise be borne through state-subsidized ACA enrollment. The reform's consequences are concentrated on single young adults, who obtain coverage overwhelmingly through the ACA Marketplace or the BHP itself, while married households --- insured predominantly through an employer --- do not benefit.
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with Juan Carlos Conesa and Qian Li (Under Review)
We propose an overlapping generations model with marriage/divorce decisions, fertility choices, education, and labor supply to quantify the role of targeted transfers on family composition. Converting those into a transfer to all adults (of 9% of GDPpc) increases marriage and divorce rates among young low-skilled individuals. For high-skilled individuals, it increases marriage, decreases divorce and increases the assortative mating of high-skilled wealthier individuals. Our counterfactual implies a reduction in fertility and single motherhood and higher female employment, particularly among young, low-skilled women. Doubling the universal transfer (around 19% of GDPpc) moderates these effects. Both counterfactuals improve welfare.
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The Not-In-Labor-Force (NILF) rate has exhibited a rising trend since the 1990s, increasing from 33.4% in 1994 to 37.5% in 2024. Meanwhile, the Federal Open Market Committee (FOMC) underwent a pivotal amendment to its longer-run goals and monetary policy strategy in August 2020, emphasizing the importance of maximum employment. Empirical evidence from the Current Population Survey (CPS) data indicates a significant but different increase in the NILF rate among individuals, especially across education and gender. This paper adopts a three-state search model with heterogeneity in gender and educational attainment to explore the distinct evolution of NILF rates. My analysis quantitatively evaluates three possible mechanisms: labor demand (indicated by market tightness), labor supply (indicated by opportunity costs of working and search behavior), and matching efficiency. Results show that the labor demand channel is the primary driver behind the increasing NILF rate among low-skilled men, which explains a 63% decrease in their NILF rate. The declining NILF rate of low-skilled women comes from their decreasing labor supply. In contrast, for both high-skilled men and women, the slight increase in their NILF rate results from the declining matching efficiency. While there is a convergence in the opportunity cost of working between males and females, females overall face higher opportunity costs of working as well as a higher reservation value.
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with Juan Carlos Conesa and Qian Li
with Juan Carlos Conesa and Qian Li