Is employer-based health insurance a barrier to entrepreneurship?

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Title: Is employer-based health insurance a barrier to entrepreneurship?
Authors: Fairlie, Robert W.
Kapur, Kanika
Gates, Susan M.
Permanent link: http://hdl.handle.net/10197/1008
Date: Jan-2009
Abstract: The focus on employer-provided health insurance in the United States may restrict business creation. We address the limited research on the topic of “entrepreneurship lock” by using recent panel data from matched Current Population Surveys. We use difference-indifference models to estimate the interaction between having a spouse with employer-based health insurance and potential demand for health care. We find evidence of a larger negative effect of health insurance demand on the entrepreneurship probability for those without spousal coverage than for those with spousal coverage. We also take a new approach in the literature to examine the question of whether employer-based health insurance discourages entrepreneurship by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure of identifying age in months from matched monthly CPS data, we compare the probability of business ownership among male workers in the months just before turning age 65 and in the months just after turning age 65. We find that business ownership rates increase from just under age 65 to just over age 65, whereas we find no change in business ownership rates from just before to just after for other ages 55-75. Our estimates provide some evidence that "entrepreneurship lock" exists, which raises concerns that the bundling of health insurance and employment may create an inefficient allocation of which or when workers start businesses.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP09/03
Copyright (published version): University College Dublin. School of Economics 2009
Subject LCSH: Employer-sponsored health insurance--United States
Entrepreneurship--United States
Businesspeople--Health and hygiene
Other versions: http://www.ucd.ie/t4cms/wp09%2003.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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