This paper provides new empirical evidence on the impacts of state and federal mental health parity laws on related labor market outcomes, particularly working time. Implemented in the last two decades, these policies aim to eliminate differences in mental and physical health benefits among group health plans. The mandated benefits for mental health drive up the costs of providing health insurance substantially. In response, employers may avoid hiring more full-time workers, whose compensation includes health insurance, by increasing working time per worker and reliance on part-time employment. Employees may also have an incentive to increase their labor supply to qualify for the benefits. Using individual-level data from the Current Population Survey and exploiting policy variation by state and year, I find state parity laws increase average weeks worked by 1.4 percent. Since self-insured firms are exempt from state regulations, parity is estimated to have nearly twice as large an effect on small firms as it does on large firms. Moreover, I study two federal parity laws and find the more comprehensive one is associated with 1.7 percent more weeks worked. Overall, there is no substantial evidence that parity laws significantly affect hours worked and prevalence of coverage.

Document Type

Working Paper


Spring 2-2017


State Mental Health Parity, Federal Mental Health Parity, Group Health Insurance Costs, Hours/Weeks Worked




Working Papers Series


Health Law and Policy | Public Affairs, Public Policy and Public Administration | Sociology | Work, Economy and Organizations



Additional Information

Working paper no. 200

The author is extremely grateful to her primary advisor Leonard E. Burman and co-advisor Sarah Hamersma; without their support and encouragement, she could not have successfully completed this paper. They were always available to help her make her work as good as could be. She specially thanks other faculty members in the department, especially Jeffery D. Kubik and Perry Singleton, who provided a lot of thoughtful critiques and helped her to improve the work. Her work also benefited from the great comments and suggestions from many department members and Center of Policy Research colleagues who took part in dissertation workshops and seminars. Any errors or omissions are her own.

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