Payroll subsidies hold promise as a tool for increasing employment, but raise concerns that they may involve large inframarginal payments that recipient firms could divert toward other purposes. I study the effect of a set of payroll subsidies offered by state Medicaid programs to nursing homes on nursing home employment and various categories of expenditure, including on subsidized workers, other workers, administration, and capital. These subsidies were designed to subsidize only increases in nurse and nursing assistant payroll expenditure relative to a nursing home’s expenditure in an initial year. They also were structured so that the maximum subsidy amounts offered varied across nursing homes within each state. I identify the effect of subsidies using this within-state, establishment-level variation in subsidies, in contrast to prior literature that relied on across-state variation in subsidy adoption. My results imply that the average nursing home increased its employment per resident-day of nurses and nursing assistants by 4.6% in response to subsidies, with not-for-profit nursing homes exhibiting larger employment responses. I also find that each dollar of subsidies offered elicited at least as much expenditure on direct care workers, suggesting that they had an incidence consistent with the full value of subsidies being passed on to subsidized workers. I find little evidence suggesting nursing homes substituted nurses and nursing assistants for other inputs, but rather find evidence consistent with nursing homes using subsidies to expand their scale, either by offering more services or taking in residents with greater care needs. Overall, the pattern of responses to these payroll subsidies suggests that they were highly effective tools for increasing nursing home employment while minimizing diversion of subsidy payments to other purposes.
Work In Progress
Do Changes in Employer Health Insurance Contributions Moderate Nominal Wage Rigidity During Recessions? (with Asako Moriya)
How Do Nursing Homes Respond to Minimum Staffing Requirements: New Evidence Using Nursing Home Accounting Data
Do Minimum Wage Increases Affect Employer Health Insurance Offerings?
What Are We Measuring When We Measure Nursing Home Care Quality? A Machine Learning Approach to Identifying the Nursing Home Quality Component of Resident Health Changes
Do Behavioral Health Changes Stick? Evidence from the Long-Run Effect of Alcohol Prohibition in the United States
On the General Equilibrium Wage Effects of Education Expansions (with Ethan Kaplan and Danny Koliner)