Article

Health Insurance Coverage and Entrepreneurship

Authors:
To read the full-text of this research, you can request a copy directly from the author.

Abstract

This article estimates the importance of health insurance coverage on the probability of self-employment. Using data from the 1993 Current Population Survey (CPS), the author focuses on the impact of having health insurance through one's spouse on the likelihood of self-employment. The best estimates suggest that a guaranteed alternative source of health insurance would increase the probability of self-employment between 2.3 and 4.4 percentage points for husbands and 1.2 and 4.6 percentage points for wives. The author's more conservative estimates suggest that universal coverage could increase the percentage of self-employed in the workforce by 2 to 3.5 percentage points. Copyright 2001 by Oxford University Press.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the author.

... In the case of married individuals, health insurance coverage through a spouse's current employer may free a worker from job lock (Lombard, 2001;Wellington, 2001). Wellington (2001) used the 1993 CPS to estimate the impact of having health insurance through one's spouse and found that the probability of business ownership increased by upwards of 3-4%. ...
... In the case of married individuals, health insurance coverage through a spouse's current employer may free a worker from job lock (Lombard, 2001;Wellington, 2001). Wellington (2001) used the 1993 CPS to estimate the impact of having health insurance through one's spouse and found that the probability of business ownership increased by upwards of 3-4%. Fairlie et al. (2011) also found evidence to support that job lock decreased for those with coverage through their spouse. ...
... The estimates in the paper suggest a 0.5 percentage point or 5% increase in self-employment as a result of Part D. Prescription drug benefits are but one part of the whole health insurance coverage, such that we may not expect very large effects compared to an expansion in overall health insurance coverage. However, this effect is quite similar in size to having access to health insurance through a spouse (at 3-4%, Wellington, 2001) or increasing the tax deductibility of health insurance for the self-employed (at 1.1 percentage points for primarily selfemployed and 0.35 percentage points for the exclusively selfemployed; Heim and Lurie, 2010). ...
Article
We explore the relationship between access to affordable health insurance and self-employment using exogenous variation from the introduction of Medicare Part D that reduced the out-of-pocket cost of prescription drugs and improved health outcomes in a difference-in-differences model using the American Community Survey. We find that our treatment group of individuals aged 65–69 were 0.5 percentage points (or 5%) more likely to be self-employed in relation to a control group aged 60–64.
... However, there are currently two contrasting views regarding the causal link between health insurance and self-employment. One view argues for a positive link because unemployed individuals with access to spousal health insurance are found to be more likely to become self-employed than those without [5]. The other argues for a negative link, in that people are more likely to work for companies that provide employer-sponsored insurance than to create their own business-as business owners, they would need to spend more on health care [6][7][8]. ...
... Echoing this finding, Heimb and Lurie (2011) found a positive effect of tax-based subsidies for self-employed health insurance on self-employment [13]. Moreover, Wellington (2001) found that unemployed individuals with access to their spouse's health insurance program are more likely to become self-employed than those without [5]. More specifically, the availability of spousal coverage increases the probability of an individual being self-employed by 2.3-4.6 percentage points. ...
... Echoing this finding, Heimb and Lurie (2011) found a positive effect of tax-based subsidies for self-employed health insurance on self-employment [13]. Moreover, Wellington (2001) found that unemployed individuals with access to their spouse's health insurance program are more likely to become self-employed than those without [5]. More specifically, the availability of spousal coverage increases the probability of an individual being self-employed by 2.3-4.6 percentage points. ...
Article
Full-text available
Using panel data from the China Health and Nutrition Survey, this study estimates the effect of the New Cooperative Medical Scheme (NCMS) on self-employment in rural China, based on a difference-indifferences method (combined with propensity score matching). Specifically, we compare employment status of the participants and non-participants groups before and after the NCMS was implemented (within the common-support region). We found that the NCMS increased a rural resident's likelihood of shifting from working for others to self-employed by 38 percentage points and that of shifting from temporarily employed to self-employed by 23 percentage points. These results suggest that apart from reducing uncertainty in future spending for the insured due to catastrophic illness, universal health insurance could also have a positive effect on the labor market, namely, that of increasing rates of self-employment.
... Most researchers have either explored employer-sponsored health insurance, also known as the "job lock" phenomenon (i.e., Bruce, Holtz-Eakin, & Quinn, 2000;Holtz-Eakin, Pendrod, & Rosen, 1996;Wellington, 2001) or health insurance tax subsidies, discussed in terms of price elasticity of demand (i.e., Gruber & Lettau, 2004;Gruber & Poterba, 1994;Gumus & Regan, 2008;Selden, 2009;Velamuri, 2005), as factors that likely have a large impact on new business creation. Both job lock and tax subsidy studies have reported mixed results; thus, indicating that the questions related to the relationship between business creation and employee sponsored health insurance or tax subsidies are left largely unanswered. ...
... Monheit and Harvey (1993) found that when the spouse has access to alternative sources of coverage at a large firm, the likelihood that the self-employed individual would hold employment-related insurance him/herself significantly declines. Using CPS data, Wellington (2001) reported that when a spouse holds employer-based insurance, the likelihood of business ownership improves between 2.3% and 4.4% for men and between 1.2% and 4.6% for women. Therefore, we hypothesize: ...
Article
Full-text available
The United States currently faces record high levels of uninsured individuals, rising healthcare costs, and increasing self-employment. A new dataset was introduced, the American Community Surveys, to confirm whether the self-employed are at a disadvantage in terms of access to health insurance, and if so, what socioeconomic, family, demographic, and occupation factors may exacerbate the problem. Results indicate that the self-employed are in fact at a significant disadvantage regarding health insurance coverage. Family income level, marital status, having a self-employed spouse, age, ethnicity, migration status, and occupational industry were found to be associated with the likelihood that a self-employed individual would have health insurance coverage. Reports released in 2010 indicate the number of uninsured Americans has reached a record high, with the number of individuals holding private insurance at its lowest reported level since the Census Bureau began tracking such data in 1987 (Wolf, 2010). Currently, the estimated number of uninsured individuals in the United States ranges from 50.7 million (United States Census Bureau, 2010) to 59 million (Cohen & Martinez, 2010). Holahan and Cook (2008) reported that between 2000 and 2006, the number of uninsured people in the United States grew by almost three and a half million, which was attributed to a decline in the availability of employer-sponsored insurance. Although unemployment has been cited as a major contributing factor to the growing number of uninsured individuals, a recent report by the Kaiser Commission (2010) indicates that cost of coverage also likely serves as a major deterrent, given that workers currently pay approximately 47% more for family healthcare coverage than they did in 2005, and employers currently pay 20% more than they did in the same time period. Holahan and Cook (2008) contend that more than half of the increase in the number of uninsured workers between 2004 and 2006 came from the self-employed and wage earners in small firms of less than 25 people. This places the self-employed at a focus of concern since they serve as a major source of uninsurance rates, both personally and through a lack of insurance availability for their employees (Holahan & Cook, 2008; Perry & Rosen, 2001).
... Using a similar strategy and Current Population Survey (CPS) data, Wellington (2001) finds a significant positive effect of having health insurance through one's partner on the probability of being self-employed. Also based on the cross-sectional CPS, Lombard (2001) similarly reports that married women are more likely to be self-employed if their husbands have health insurance. ...
... Standard errors are robust to heteroscedasticity and clustering at the individual level *Significance at the 10% level **Significance at the 5% level ***Significance at the 1% level Public health insurance, individual health, and entry into self-employment estimate the same hazard rate model but exclude the HICD and directly include factors that determine the HICD amount instead. This approach is comparable to the extant literature for the USA, which does not calculate a HICD (Holtz-Eakin et al. 1996;Wellington 2001;Zissimopoulos and Karoly 2007;Fairlie et al. 2011). Table 6 shows the logit coefficients for the full sample and separately for men and women; average marginal effects of the most interesting variables appear in the rightmost three columns of Table A 3 in Appendix A. Poorer health significantly decreases the probability of entry into self-employment in the pooled sample and for men. ...
Article
Full-text available
We investigate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into self-employment. Health insurance systems that distinguish between the two sectors of employment create incentives or disincentives to start a business for different individuals. We estimate a discrete time hazard rate model of entry into self-employment based on representative household panel data for Germany, which include individual health information. The results indicate that an increase in the health insurance cost differential between self-employed workers and paid employees by €10 per month decreases the probability of entry into self-employment by 1.7% of the annual entry rate. This shows that entrepreneurship lock, which an emerging literature describes for the system of employer-provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health-care reforms.
... Using a similar strategy as Holtz-Eakin et al. (1996), but the larger, Current Population Survey (CPS), Wellington (2001) finds a significant positive effect of having health insurance through one's partner on the probability of being self-employed. Also based on the crosssectional CPS, Lombard (2001) similarly reports that married women are more likely to be selfemployed if their husbands have health insurance. ...
... In this section, we take a step back and re-estimate the same hazard rate model, but exclude the HICD and directly include factors that determine the HICD amount instead. This approach is comparable to the extant literature for the USA, which does not calculate a HICD (Holtz-Eakin et al., 1996;Wellington, 2001;Zissimopoulos and Karoly, 2007;Fairlie et al., 2011). Table 5 shows the probit coefficients for the full sample and separately for men and women; average marginal effects of the most interesting variables appear in the rightmost three columns of Table A 3 in Appendix A. ...
... None of the interaction terms have a statistically significant coefficient estimate, lending support to the parallel trend assumption. 20 See also Wellington (2001) and Gumus and Regan (2014 For these specifications, we first limit the sample to include only individuals who were consistently wage and salary workers in the first four months of interviews. We data not yet being available. ...
... See, for example, Holtz-Eakin et al. (1996),Madrian and Lefgren (1998),Wellington (2001), andGumus and Regan (2014). ...
Article
Full-text available
This paper estimates the impact of the implementation of the Affordable Care Act (ACA) in 2014 on the decision to be self-employed. Using data from the Current Population Survey, we employ two identification strategies. Utilizing prereform variation in state nongroup health insurance market regulations, we find that the ACA did not increase self-employment overall in states that lacked similar provisions in their nongroup markets prior to 2014. In specifications that utilize variation across individuals in characteristics that could make it harder for them to purchase insurance if they left their current employer, we also do not find that the ACA differentially increased self-employment. However, in states that lacked the ACA nongroup market provisions, we do find a statistically significant increase in the second year of implementation (when individuals had more time to adjust behavior and the exchanges functioned properly) among individuals eligible for insurance subsidies, suggesting that a combination of time to adjust, low uncertainty and low insurance costs may be necessary for nongroup health insurance reforms to impact self-employment.
... that entrepreneurial leap" (Litan, 2014). Coverage certainty may have the opposite effect-a suggestive, if observational, indication being that people who can join spouses' plans are 1.2 to 4.6 percentage points more likely to be self-employed than people lacking this option (Wellington, 2001). ...
... The first is price. The high cost of individual versus group health plans may deter self-employment (Wellington, 2001); and as noted, where adverse selection worries insurers (Corlette, n.d.;Gruber, 2010), GI may raise premiums (Bunce, 2002, as cited by New, 2006McCracken, 2014). Individual market premium data exist only for some state years, 10 but data exist for all state years on the average annual premium that workers with job-based insurance pay for family and single coverage. ...
Article
Individual-level research has found self-employment positively linked to regulations that facilitate health insurance access outside the large group market. Since self-employment can aid regional economies, if such a relationship holds at the state level, insurance regulation may bolster state economic development. Yet such regulations may spawn high insurance premiums, which can depress self-employment. This study tested whether state self-employment rates from 2009 to 2011 related positively to states’ use of “guaranteed issue” mandates in the individual and small group markets from 2008 to 2010. These mandates require insurers to offer coverage to all applicants. Self-employment rates are measured as the share of the nonagricultural labor force self-employed, and alternately as the number of individual proprietorships per 1,000 population. Both measures are statistically higher in states that mandate guaranteed issue for groups of one in the small-group market than in states that do not; however, they are insensitive to individual market-guaranteed issue and inversely related to premiums.
... [2] There are several papers that examine the linkage between health insurance and entrepreneurship. Two of the more comprehensive studies of this type include Holtz-Eakin, Penrod, and Rosen (1996) and Wellington (2001). ...
... After controlling for job characteristics, such as the presence of pensions and life insurance, individuals with employer-provided health insurance are no less likely to become self-employed than employees (in similar jobs) without employer-provided health insurance. Wellington (2001) examines health insurance and the likelihood of being, as opposed to becoming, self-employed. Wellington, focuses on the role of spouses in this decision. ...
Article
Until recently, attention deficit hyperactivity disorder (ADHD) was considered a disorder exclusively of childhood. However, research indicates that for a large number of children diagnosed with ADHD the disorder persists into adulthood. As a result, it is important for employers to be aware that employees may be coping with ADHD, and that the symptoms of the disorder may negatively impact their performance. The purpose of this article is to provide those involved in business operations and management with a general familiarity of ADHD, as well as specific information pertaining to the disorder's implications for the workplace.
... In addition, the results are consistent with Velamuri (2008), who found that the TRA86 introduction of the self-employed health insurance deduction increased the rate of selfemployment among woman by between 14% and 25%, though they are inconsistent with Gumus and Regan (2009), who find small or no effects. Finally, the fact that we find a significant effect of health insurance considerations on the decision to be self-employed is also consistent with results in Madrian and Lefgren (1998), Wellington (2001), Gumus and Regan (2009), and Fairlie (2008, who find that having some other source of health insurance coverage has a significant effect on the decision to be self-employed. ...
... 3 This paper is also related the literature that began withMadrian (1994) examining the effect that ESI has on various work margins.Gruber and Madrian (2002) provide a nice survey of this "job-lock" literature. Several papers, includingHoltz-Eakin et al. (1996),Madrian and Lefgren (1998),Wellington (2001),Fairlie et al. (2008), andGumus and Regan (2009) have examined the effect of ESI on the decision to be self-employed, though with mixed results. ...
Article
Full-text available
This paper estimates the effect of an increase in the deductibility of health insurance premiums for self-employed individuals on the probability of being self- employed. Using a panel of tax returns from 1999 to 2004, we estimate fixed effects instrumental variable regressions for the probability of being self-employed, entering into self-employment, and exiting from self-employment. Our results suggest that this policy change increased the probability of being self-employed by 16.8%, and increased the probability that a taxpayer would be primarily or exclusively self-employed by 15.4% and 13.2% respectively. We also find that the probability of entering self-employment increased by 31%.
... However, again using secondary economic data from the early 1990s, Wellington (2001) estimates the impact of health insurance availability through a spouse on the probability of self-employment. She finds the availability of health insurance could increase self-employment by between 2 and 3.5 percent. ...
Article
Full-text available
Unlike prior studies of the impact of health insurance on entrepreneurship, this paper uses primary data from a representative recent survey of entrepreneurs. First, we report the characteristics and socio-economic backgrounds of entrepreneurs. Second, we document that the lack of health insurance has a significant inhibiting impact on entrepreneurs. This paper also documents that the importance of health insurance availability increases for entrepreneurs who are self-funded, married, have children, are from less privileged backgrounds and are in advanced stages of their lives as indicated by having advanced degrees or long work experience when they become entrepreneurs. These results should be of much interest to scholars, managers and policymakers.
... Their results were economically significant, though not statistically significant. Madrian (1998); Wellington (2001);and Fairlie et al. (2011) also studied similar effects utilizing the later SIPP and CPS data sets, and found similar results: individuals with higher demand for health expenditures are more likely to be "locked," the lack of portability for health insurance coverage does depress business formation, and alternative source of insurance does raise entry into self-employment. Their estimations of these effects are both economically and statistically significant. ...
Article
We utilize the NLSY97 data to study the impact of health insurance coverage on the decision to enter self-employment. We find that employer insurance coverage has a strong "pull" effect on the decision, especially among older males. Older females who gain dependent coverage are more likely to start a business, but a causal relationship cannot be established due to endogeneity. Health insurance coverage has little impact on the entry decision of more serious entrepreneurs: those who started a corporation, stared employer businesses and claim to be the manager of their businesses.
... Similarly, given the way that private health insurance is linked to employment in the US, mothers of a child with costly medical needs may be more likely to work full-time in order to qualify for health insurance benefits. Several studies find that married women who do not have access to health insurance through their husbands are more likely to work full-time, presumably in order to qualify for health benefits (Buchmueller and Valletta, 1999;Wellington, 2008;Kapinos, 2009). At the same time, the availability of means-tested public health insurance may reduce the labor supply of other women, particularly those whose prospects for obtaining employer-sponsored insurance are poor (Moffit and Wolfe, 1992;Yelowitz, 1995). ...
Article
Full-text available
Previous research has documented a negative relationship between child disability and maternal labor supply. Because of data limitations, most studies in this literature use broad measures of disability, which may obscure important differences among children with limiting health conditions. This paper presents new evidence on the labor supply of women with disabled children, exploiting disability information provided by 2000 US Census. This large nationally representative sample allows us to test for differences across different types of disabling conditions. We find that accounting for this heterogeneity in conditions is important. Using a broad definition of disability results in small differences between women with and without a disabled child. When we use a more detailed classification, we find larger labor supply reductions for mothers of children with physical disabilities or limitations in their ability to care for themselves. There is less evidence that having a child with either mental or emotional limitations or a sensory impairment is negatively related to employment or weekly hours. We also test for heterogeneous effects related to child age and maternal education. We find no clear pattern with respect to age and some evidence that the relationship between child disability and maternal labor supply is stronger for less educated mothers.
... Studies of the determinants of self-employment suggest that a number of factors are at work that the self-employed may be pulled into that type of work by its attractive features such as high rewards and non-pecuniary benefits, including job autonomy and hours flexibility, while others may be pushed into self-employment for more negative reasons like poor job prospects in the wage and salary market or bad health (Evans and Leighton, 1989;Fairlie and Meyer, 1996;Blanchflower and Oswald, 1998;Manser and Picot, 1999;Devine, 2001;Hundley, 2001b;Lombard, 2001;Moore and Mueller, 2002). Other individual characteristics have been found to play a role as well in workers who are self-employed including a willingness to accept risks, access to capital, and access to health insurance coverage through another source such as a spouse, although the latter is not a consistent finding (Evans and Jovanovic, 1989;Evans and Leighton, 1989;Holtz-Eakin, Joulfaian, and Rosen, 1994;Holtz-Eakin, 1995, 2000;Blanchflower and Oswald, 1998;Bruce, 1999;van Praag and Cramer, 2001;Wellington, 2001). At the macroeconomic level, factors like technology and industrial mix, tax rates, and the generosity of Social Security benefits have also been linked to changes in self-employment rates over time (Blau, 1987;Bruce, 2000Bruce, , 2002Gentry and Hubbard, 2000;Schuetze, 2000). ...
... Previous researchers have shown that employment-based health insurance aects job mobility and deters entrepreneurship (Gruber and Madrian, 2002;Wellington, 2001;Fairlie et al., 2011;Velamuri, 2012). In particular, the fear of losing health insurance coverage discourages workers from switching jobs or starting their own business, which creates job lock or entrepreneurship lock. ...
... Further consistent with "entrepreneurship lock, " Fairlie, Kapur, and Gates (2011) show that business ownership rates are higher for individuals just over age 65 (who are eligible for Medicare) relative to individuals just under age 65. Other studies in the literature find mixed results, with some estimating that health insurance reduces transitions into self-employed business ownership by as much as 25% and others finding no evidence that health insurance reduces business creation (Holtz-Eakin, Penrod, and Rosen 1996;Currie and Madrian 1999;Bruce, Hotlz-Eakin, and Quinn 2000;Wellington 2001;DeCicca 2007). ...
... En la literatura se ha encontrado que uno de los principales determinantes es el número de hijos, encontrándose un efecto positivo en la probabilidad de participar en trabajos por cuenta propia (Conelly, 1992;Devine, 1994;Wellington, 2001). Además, la evidencia muestra que también existen mayores probabilidades de escoger un trabajo independiente en mujeres que tienen pareja (Boden, 1999). ...
Article
A pesar del alto desarrollo económico que ha experimentado Chile durante las últimas décadas, la tasa de participación laboral femenina se ha mantenido dentro de las más bajas del continente, alcanzando un 49,4% en el año 2014 según datos del Banco Mundial. Por lo tanto, comprender cuáles son los determinantes que llevan a las mujeres en Chile a tomar la decisión de participar o no de la fuerza laboral son relevantes para entender esta situación. Un enfoque tradicional para responder a esta pregunta es el desarrollado por Mincer (1960), el cual encuentra que la edad, la escolaridad y el número de hijos son variables que ofrecen una explicación de la participación laboral femenina. No obstante, a pesar de los limitados trabajos existentes sobre esta materia, se han realizado trabajos fructíferos que han ayudado a encontrar nuevas variables para explicar este tema como, por ejemplo, la inclusión del cuidado de personas dependientes y la percepción de roles de género por parte de la mujer (Puentes et al., 2012; Contreras & Plaza, 2010). En esta investigación se busca incrementar el conocimiento que se tiene sobre la participación laboral femenina, mediante un análisis más desagregado en la decisión de participación. En particular, se estudiará la elección de trabajar por cuenta propia o de manera asalariada.
... Only a handful of papers have examined the effect of health insurance on transitions to entrepreneurship. One line of research from Holtz-Eakin et al. (1996), Wellington (2001), and Fairlie et al. (2011) used the presence or absence of spousal insurance; this approach found mixed results. This line of research has difficulty accounting for the fact that spousal health insurance is not randomly assigned; individuals who have spouses with health insurance may be unusual in other ways, some of which are hard to observe and control for. ...
Article
Full-text available
Is the difficulty of purchasing health insurance as an individual or small business a major barrier to entrepreneurship in the USA? I answer this question by taking advantage of the natural experiment provided by the Affordable Care Act’s dependent coverage mandate, which allowed many 19–25 year olds to acquire health insurance independently of their employment. Using a difference-in-difference strategy, I find that the dependent coverage mandate did not increase self-employment among young adults overall, but increased self-employment among disabled young adults by 19–23%.
... Otros estudios han analizado la relación existente entre el acceso de la mujer al autoempleo con la maternidad. Así, diversos estudios [Edwards y Field-Hendrey (2002); Boden (1996);Connelly (1992); Devine (1994);MacPherson (1988); Schiller y Crewson (1997); Wellington (2001)] sugieren que las mujeres con hijos tienen una mayor probabilidad de entrar en el autoempleo o de estar autoempleada. ...
... Our paper also relates to the literature on health insurance access and the decision to be self-employed (Boyle & Lahey, 2010;Fairlie et al., 2011;Fossen & König, 2017;Heim & Lurie, 2010, 2014a, 2014bHoltz-Eakin et al., 1996;Niu, 2014;Velamuri, 2012;Wellington, 2001). 5 While results are somewhat mixed, several prominent studies do suggest an important role of health insurance access in self-employment decisions. ...
Article
Full-text available
Plain English Summary Medicaid expansion via the Affordable Care Act did not increase self-employments rates, but it did increase health insurance coverage rates of low-income entrepreneurs. We compare states that expanded Medicaid to those that did not and examine how self-employment rates and health insurance rates changed over time. Self-employment rates followed similar trends in expansion and non-expansion states suggesting no differential effect of Medicaid expansion. Health insurance coverage rates for the self-employed increased in both expansion and non-expansion states due to various provisions of the Affordable Care Act, but Medicaid expansion states experienced larger increases. This has implications for entrepreneurship research and policy. The major social cost of poor health insurance access for the self-employed is not that it reduces self-employment but that it reduces health insurance coverage rates among the self-employed. Improved health insurance access can improve the health and well-being of the self-employed and their families.
... This is because the probability of being self-employed at time t depends on the probability of switching into self-employment at some previous time and then surviving until t . On the other hand, as Wellington (2001) points out, application (II) excludes people who are already successfully self-employed, which is evidently a group of some interest. Low annual switching rates from wage/salary employment into self-employment also means that (II) sometimes suffers from having small numbers of self-employed observations; and the characteristics of switchers may well be different from those of non-switchers. ...
... Prior research has found that individuals lacking health insurance are less likely to be self-employed (Gamus and Regan 2015;Fairlie et al. 2011;Wellington 2001;Holtz-Eakin et al. 1996). This finding has given support to the job lock hypothesis that posits the loss of employer provided health insurance inhibits potential entrepreneurial employment. ...
Article
Knowledge of the determinants of self‐employment income is critical to entrepreneurial development strategies if the development goal is to increase incomes not just employment. Using American Community Survey data, unconditional quantile regression is used to investigate differences in the relationship between entrepreneurial income and an array of individual, industry, and regional characteristics across the self‐employment income distribution. Personal attributes, such as education, race, age, and gender, both explain differences in self‐employment income and vary in importance across the income distribution. Regional agglomerative effects are significantly positive and stronger at the upper end of the self‐employed income distribution.
... As for insurance and other financial investment behaviors, evidence is found on insurance's role as a risk floor for potential entrepreneurs (Ilmakunnas & Kanniainen, 2001;Luo & Zeng, 2020;Olds, 2016;Wellington, 2001), enabling them to be confident in starting their own businesses. Comparatively, studies demonstrate similar characteristic of portfolios held by entrepreneurial households that is short of diversification (Gentry & Hubbard, 2004), while Luo and Zeng (2020) further shows the negative association between diversified investment and entrepreneurial decisions. ...
Article
Utilizing the 2017 China Household Finance Survey (CHFS) data, this paper is among the first to define and measure digital financial capability (DFC), showing that it has significant and positive influence on business ownership, business innovation and financial performance. The results still hold after addressing endogeneity. Furthermore, we illustrate how DFC impacts entrepreneurial performance through sale, borrowing and investment channels. In addition, heterogeneity examinations show that improvement of DFC can benefit vulnerable populations more, especially those in rural or less-developed areas. This study calls attention to recognizing the importance of DFC for micro businesses in the digital era, and provides implications concerning both employment and economic inclusion policies for countries which might go through similar stages.
... Third, monthly limits on earning levels imposed by public programs such as SSDI and SSI may encourage greater use of self-employment because flexibility regarding work hours may make it easier to comply with these earning limits when SE. Similarly, having these sources of income available may create an incentive to use self-employment as an "easy" employment option like "partial retirement" (Fuchs, 1982). Finally, the fact that self-employment rates are higher among people with work limitations appears to be at odds with studies that emphasized that people with greater health care needs and demand for private health insurance may be deterred from self-employment (Fairlie, Kapur, & Gates, 2011;Velamuri, 2012;Wellington, 2001). Because private health insurance is commonly obtained through an employer, and people with disabilities have greater medical needs, one might assume that people with disabilities would prefer paid employment to self-employment. ...
Article
Using data from the Current Population Survey, the authors studied self-employment among people with work limitations in the United States. They found that self-employment rates are higher among workers with limitations compared with workers without limitations. Furthermore, the self-employment differential increases with education and age. This investigation of possible explanations has revealed that expected wage differences between self-employed people and employees are similar between disability groups but average work hours are lower and more variable among the self-employed with work limitations. This evidence is consistent with the view that people with disabilities might choose self-employment because of non-monetary motives.
... Contrary to the entrepreneurship-lock argument, health insurance can also have an entrepreneurship promotion effect, depending on the portability of the health insurance package (that is, whether health insurance is tied to employment or not) (Le et al., 2019). Health insurance access via either the employer or a spousal package has been shown to be a significant determinant of being self-employed (Gai & Minniti, 2015;Wellington, 2001). Health insurance reforms that improve access to health insurance for the self-employed through fiscal instruments (tax deductibility or tax subsidies) have been shown to increase the probability of self-employment (Gumus & Regan, 2015;Heim & Lurie, 2010;Velamuri, 2012). ...
Article
Full-text available
Health insurance can have important effects on self-employment and self-employment transitions. However, there is a literature gap on the relationship between health insurance and self-employment in low- and middle-income countries, especially in the context of the rapid expansion of health insurance in these countries. This article examines this relationship in Vietnam with a focus on a comparison between the voluntary scheme for the informal sector (mostly self-employed workers) and compulsory insurance for the formal sector (mostly wage workers). We employ a Probit model with selection on a panel from the Vietnamese Household Living Standards Surveys 2010–2014 to investigate the association between health insurance and self-employment entry and exit. We show that those with compulsory health insurance in Vietnam, the formal workers, are 10 percentage points less likely to enter self-employment than those having voluntary insurance. Regarding self-employment exit, people with compulsory insurance are more likely to exit self-employment compared with those covered by voluntary insurance. However, the effect size is relatively small.
... Apart from credit and savings, insurance adoption is also found to increase the probability of self-employment (Ilmakunnas and Kanniainen 2001;Olds 2016;Velamuri 2012;Wellington 2001). However, the mechanism is not explained as mitigating liquidity constraint, but rather, a reduction of risk (Olds 2016). ...
Article
This study investigates the impact of digital financial capabilities on household business ownership and business innovation. Utilising the 2015 China Household Finance Survey (CHFS) data, this paper constructs robust capabilities scores and finds positive associations between digital financial capabilities and household entrepreneurship. After specifying instrumental variables, the results still hold. In addition, we compare the driving forces of the impact through componential dimensions, and discuss the different function channels that digital financial capabilities affect business ownership and business innovation. What’s more, we add the interaction term of digital capability and financial capability, illustrate its role in improving the goodness of fit of the models, and further discuss the interaction effect both generally and at each level of the capabilities scores. Finally, we conduct robustness checks across socioeconomic groups and provide policy implications. This study highlights the different function channels of digital financial capabilities concerning different entrepreneurial activities, as well as the importance of interaction effect in understanding how digital financial capabilities affect household entrepreneurship.
... Many entrepreneurs have pressing commitments relating to the home, including caregiving responsibilities which can make working away from home problematic or onerous (Craig et al. 2012;Edwards and Field-Hendrey 2002). For instance, evidence shows that household members-especially women-who look after disabled people, or who have young children, are more likely to be self-employed (Craig et al. 2012;Rønsen 2014;Wellington 2001). ...
Article
Full-text available
Nearly 40% of British self-employees are homeworkers. Using a large representative sample of the UK longitudinal survey data, we explore the determinants of self-employed homeworking, distinguishing between genders. We reject the notion that homeworking is a transitional entrepreneurial state that the self-employed “grow out of”, while establishing that both employer status and business structure play an important role in predicting which self-employed become homeworkers. Our findings also shed light on two outstanding puzzles in entrepreneurship scholarship: why so few of the self-employed create jobs for others, and why on average the self-employed suffer an earnings penalty compared with employees.
... One aspect of this barrier includes the need for individuals to withdraw from their present health insurance programs and then join a new program that may result in cost-prohibitive premium increases. For example, Wellington (2001) used data from the Current Population Survey (CPS) and found that those with access to a spouse's health insurance policy are more likely to start a business; this study's more conservative estimates suggest that universal coverage could increase the number of self-employed in the workforce by 2 to 3.5 percentage points. Fairlie et al. (2011) addressed the limited research on the topic of entrepreneurship lock by using panel data from matched CPS. ...
Article
Full-text available
A growing concern exists with regard to the possibility that nonportability of employer-provided health insurance impedes self-employment and restricts business creation. In 1995, Taiwan implemented a National Health Insurance (NHI) program that extended health insurance coverage to all citizens. Such changes provide researchers with the opportunity to observe a natural experiment. Using a difference-in-differences regression on data from the Survey of Family Income and Expenditure in Taiwan, this paper examines the effects of universal health insurance on the likelihood of being an entrepreneur. We focus on two possible types of entrepreneurial activity: employers who hire workers and own-account workers. Results showed that implementation of NHI significantly decreased the incidence of own-account workers but increased the incidence of employers who hire workers. The best estimated possibility of being an employer increases by 3.3 percentage points, after NHI. Thus, the implementation of universal health insurance enables some new businesses, while inhibiting own-account workers. These findings should be informative for countries that plan to adopt a similar health policy. © 2018 Springer Science+Business Media, LLC, part of Springer Nature
... Such individuals can also form the bases of local entrepreneurial development efforts, which form the basis for the economic success of regional economies (Acs, 2007, Glaiser & Kerr, 2010, Spindler, 1994Shrestha, Goetz, & Rupasingha, 2007;Yenerall 2008). More successful entrepreneurs tend to be better skilled and better educated (Willis et al., 2012;Shrestha et al., 2007;Hamilton, 2000;Wellington, 2001;Holtz-Eakin et al., 1994); hence, the set of arguably underutilized workers remain a target for small business training programs and efforts that provide appropriate access to capital for start-up businesses. Previous literature (Brown, 2003) has outlined a role for CTE in training future entrepreneurs, and a 2012 survey of CTE State Directors indicated that 80% identified entrepreneurship education as an extremely important skill for future (Consortium for Entrepreneurship Education, 2012). ...
Article
Purpose – The purpose of this paper is to examine the long-run impact of federal government healthcare subsidies on the level of entrepreneurship as measured by self-employment. Design/methodology/approach – Using annual healthcare and employment data from 1948 through 1999, the paper empirically examines the relationship between the growth in employer-provided healthcare and the rate of self-employment as a share of the non-agriculture, civilian labor force. Findings – The regression results imply that there is a consistent effect that has appeared over time – where federal healthcare subsidies have disproportionately benefitted larger firms, contributing to the decline in the rate of self-employment, within-firm innovation, and factor mobility over time. Research limitations/implications – The research in this study is limited by the examination of self-employment only and a constant institutional structure across all states, only varying across time for the entire USA. In addition, an empirical study looking at how the value of healthcare benefits have changed over time – vs the sole question in this study that depends upon whether or not an individual is covered or not would be very useful in determining the true effect on an entrepreneur. Social implications – Reducing or removing the layers of healthcare subsidies would bring about an increase in the transparency of the wage-productivity relationship and a more efficient allocation of labor and entrepreneurial ability across firm sizes. Originality/value – This paper presents empirical evidence supporting specific improvements to national healthcare policy at a time when such policy is undergoing significant change with consequences for entrepreneurial decision making.
Article
Drawing from social capital theory, the authors examine the relationship between family capital characteristics and new venture start-up rates in the United States. The results of this study improve the understanding of (a) how families matter in an entrepreneur’s decision to start a business, (b) how wealth and health care considerations affect the start-up decision, and (c) whether and how these effects differ among the largest ethnic groups in the United States.
Article
We identify some difficult problems with self-employment in Japan, focusing on some differentials between an employed and a self-employed household's characteristics (i.e., the structure of the household, income, public pension and healthcare). Our explanatory study shows that the self-employed households have many household members, have higher working person ratios and contain elderly persons (those aged 65 and over). Their income level is not always high and is particularly lower in households without children and it is compensated by the family's worker income and public pension, while they pay a higher private pension premium and also expend a large sum of money for healthcare. Furthermore, self-employed households take care of household members with more serious conditions and who need nursing care. The suggestions for the new research fields of Japanese self-employment are presented.
Article
Full-text available
In the US, health insurance is linked to employment. The tax code treats health insurance premiums preferentially for employers, but not individuals. We show that this regressive policy reduces talent mis-allocation in two ways: (i) The larger tax benefit to those with higher health risk and managerial talent, conditional on being entrepreneurs, alters the incentive to be an entrepreneur. (ii) This enlarges the tax base, which reduces the effective tax rate, and increases wage and capital income. Our general equilibrium model with heterogeneous agents shows that the subsidy can increase welfare, with a maximum gain of 0.46% in consumption equivalent variation.
Article
Using China’s National Cooperative Medical Scheme (NCMS), a heavily subsided public medical insurance (PMI) scheme, aiming at covering all rural populations in China, as a quasi-natural experiment, we find that PMI unleashes entrepreneurship in the rural economy. This finding provides supporting evidence for Arrow’s risk-shifting theory and enriches the literature on the effect of PMI that has focused mainly on health impact and consumption smoothing. We also demonstrate that PMI increases entrepreneurial investments primarily through the channel of wealth effect resulting from reduced out-of-pocket medical expenses. Besides, the entrepreneurship cultivation effect of PMI is more pronounced among rural households that are wealthier, have fuller insurance coverage, or have younger heads.
Article
There are far more entrepreneurs than most people realize. But the failure rate of new businesses is disappointingly high, and the economic impact of most of them disappointingly low, suggesting that enthusiastic would-be entrepreneurs and their investors all too often operate under a false set of assumptions. This book shows that the reality of entrepreneurship is decidedly different from the myths that have come to surround it. Scott Shane, a leading expert in entrepreneurial activity in the United States and other countries, draws on the data from extensive research to provide accurate, useful information about who becomes an entrepreneur and why, how businesses are started, which factors lead to success, and which predict a likely failure. The Illusions of Entrepreneurship is an essential resource for everyone who has dreamed of starting a new business, for investors in start-ups, for policy makers attempting to facilitate the formation and survival of new businesses, and for researchers interested in the economic impact of entrepreneurial activity. Scott Shane offers research-based answers to these questions and many others: Why do people start businesses?. What industries are popular for start-ups?. How many jobs do new businesses create?. How do entrepreneurs finance their start-ups?. What makes some locations and some countries more entrepreneurial than others?. What are the characteristics of the typical entrepreneur?. How well does the typical start-up perform?. What strategies contribute to the survival and profitability of new businesses over time?.
Thesis
Full-text available
Nous proposons une analyse originale de l'impact de la complémentaire santé sur les comportements des travailleurs et des firmes sur le marché du travail. Le premier chapitre explicite théoriquement les politiques salariales et d'investissement en santé choisies par l'entreprise lorsque celle-ci n'observe qu'imparfaitement l'état de santé du salarié et où l'investissement en santé peut se traduire par des gains de productivité, via un meilleur état de santé. Nous montrons que les deux politiques sont dépendantes de la productivité de la firme. Le deuxième chapitre explique les raisons pour lesquelles l'offre jointe complémentaire/salaire diffère selon la structure de la firme. Nous montrons que les TPE et plus généralement les entreprises soumises à des contraintes financières plus importantes n'offrent pas de couverture, celle-ci étant généralement liée au contrat de travail des salariés les mieux payés. Le troisième chapitre analyse empiriquement l'impact de la complémentaire santé sur l'état de santé des travailleurs. Etre couvert (relativement au fait d'être non-couvert) n'améliore pas significativement l'état de santé. De même, l'accès à une couverture collective (relativement à une couverture individuelle) ne se traduit pas par un état de santé significativement accru. Le dernier chapitre analyse quant à lui le comportement d'absentéisme du travailleur sous l'effet de la complémentaire collective. La présence d'un contrat de groupe induit la présence d'aléa moral sur les arrêts courts lorsque le travailleur appartient à des firmes de petites tailles indemnisant faiblement les arrêts de travail.
Article
Healthcare reform in the USA requires all Americans to buy health insurance and businesses above a certain size to offer healthcare coverage to their employees by 2014. Understanding why some entrepreneurs do not provide employer-based health insurance is important and might help to solve future health insurance problems. Using two unique features which have not yet been discussed in the literature, namely, efficiency–wage theory and a compensation package of monetary wage and health insurance coverage, we provide here a theoretical foundation to why small firms are less likely to offer health insurance and are more likely to have employees with only a weak preference for acquiring health insurance. To reach the goal of health insurance coverage for all, one feasible solution is to allow small firms or individuals to pool together and pay a lower insurance premium.
Article
Purpose The purpose of this paper is to provide a systematic review of empirical evidence on the labour market effects of health insurance from the supply side. Design/methodology/approach The study covers the largest peer-reviewed and working paper databases for labour economics and health studies. These include Web of Science, Google Scholar, Pubmed and the most popular economics working paper sources such as NBER, ECONSTOR, IDEAS, IZA, SSRN, World Bank Working Paper Series. The authors follow the PRISMA 2009 protocol for systematic reviews. Findings The collection includes 63 studies. The outcomes of interest are the number of hours worked, the probability of employment, self-employment and the level of economic formalisation. The authors find that the current literature is vastly concentrated on the USA. Spousal coverage in the USA is associated with reduced labour supply of secondary earners. The effect of Medicaid in the USA on the labour supply of its recipients is ambiguous. The employment-coverage link is an important determinant of the labour supply of people with health problems and self-employment decisions. Universal coverage may create either an incentive or a disincentive to work depending on the design of the system. Finally, evidence on the relationship between health insurance and the level of economic formalisation in developing countries is fragmented and limited. Practical implications This study reviews the existing literature on the labour market effects of health insurance from the supply side. The authors find a large knowledge gap in emerging economies where health coverage is expanding. The authors also highlight important literature gaps that need to be filled in different themes of the topic. Originality/value This is the first systematic review on the topic which is becoming increasingly relevant for policy makers in developing countries where health coverage is expanding.
Thesis
We study the effect of improved access to health insurance on entrepreneurial rates across industries. We use the 2006 reform of the Massachusetts health care market as our shock. In contrast to previous research, we use our shock to test which kinds of startups were more likely to be created in addition to whether individuals became more likely to become entrepreneurs. We develop a theoretical model uses institutional heterogeneity to make predictions on how the reform should affect the distribution of entrepreneurs across industries. We see evidence that although non-profit entrepreneurship was significantly affected, overall entrepreneurship is constrained by factors other than access to health care.
Article
While the possible negative effect of employer-sponsored health insurance on labor mobility (job lock) has spawned substantial research, little research has considered differences in job lock between rural and urban areas. Job lock might differ in rural areas because of specific features of rural economies, in particular, the thinness of rural labor markets. This paper estimates measures of job lock for rural and urban areas. Parameter estimates suggest that it is larger in rural areas. The results also indicate that nonwage benefits such as retirement plans, paid vacation, and sick pay are more important factors in married rural workers decisions to change jobs while wages are a more important factor in the transition decisions of single urban workers.
Article
Most of the previous literature examining health insurance and entrepreneurship focused on the effects of provisions of health insurance coverage on the decision to start or end self-employment. This paper takes a different approach and investigates the decision to purchase health insurance once self-employed. Using data from the US Federal Reserve Board’s 2016 Survey of Consumer Finances, we found that in 2016 (when full provisions of the Affordable Care Act were in place) the self-employed were less likely to be insured, especially females who in the general population are more likely to be insured. Compared to the general population, the odds of being covered by health insurance were 62% lower for self-employed males and 83% lower for self-employed females. Additionally, self-employed females were less likely to be insured when they reported using friends and family as a source of financial information.
Article
Previous studies have found that health insurance is an important component of workers' labor market decisions. In this article, the author studies the effect of health insurance availability and price on the likelihood of self-employment by examining the Massachusetts (MA) health care reform enacted in 2006. A model of compensating differentials predicts that the effect of the MA reform on the likelihood of self-employment is theoretically ambiguous because different components of the reform should have opposing effects. For a sample from the Current Population Survey, the reform leads to a large and significant increase in health insurance coverage, and it increases the likelihood of self-employment by 0.71 percentage points, or an 8.4% increase from the pre-reform average in MA. The estimated positive effect on the likelihood of self-employment persists, though decreases, in the long run. The empirical evidence suggests that a part of the decline is coming from the opposing effects of various components of the reform.
Article
Using a data set of US tax records spanning 2008 to 2013, the authors study the impact of the Affordable Care Act (ACA) young adult dependent coverage requirement on labor market–related outcomes, including measures of employment status, job characteristics, and postsecondary education. They find that the ACA provision did not result in substantial changes in labor market outcomes. Results show that employment and self-employment are not statistically significantly affected. Although some evidence supports the increased likelihood of young adults earning lower wages, not receiving fringe benefits, enrolling as full-time or graduate students, and young men being self-employed, the magnitudes imply extremely small impacts on these outcomes in absolute terms and when compared to other estimates in the literature. The authors find these results to be consistent with health insurance being less salient to young adults, compared to other populations, when making labor market decisions.
Article
This paper evaluates whether the implementation of the 2006 Massachusetts health reform law affected the decision of taxpayers to be self-employed, using both difference-in-differences and synthetic control methods on a panel of tax returns that spans 1999-2010. Though tenuous, our results suggest that the reform led to a decline in the rate of taxpayers earning a majority of income from self-employment. In addition, it appears to have had a positive impact on earning some self-employment income among joint filers and earning the majority of income from self-employment among older taxpayers, but these were offset by negative impacts on single filers and taxpayers age 35-49.
Article
Unlike most wage earners, self-employed Americans have limited access to health insurance and face higher costs. Thus, social commentators and policymakers argue that many potential entrepreneurs are “locked” into their current jobs for fear of losing their health coverage even though they could be more productive in self-employment. Using a large data set for the period 2000–2008, we find the availability of employer-provided health insurance to be negatively correlated to the likelihood of self-employment in the long run, but the effect to be mediated by individual and family health status. However, we find employer-provided health insurance to have no significant effect on the probability of switching in the short run. Finally, we find differences in the magnitude of the effects between our samples of husbands and wives.
Article
This paper examines the sources of the decline in self-employment among near-retirees over 1994–2012. Using Current Population Survey data, tabulations imply that the decline was driven by an increase in the exit rate to wage and salary employment, a decline in the rate of self-employment among new entrants into this age cohort, and an increase in the share of these new entrants. Multinomial logits suggest that health insurance coverage and after-tax prices of health insurance were significantly associated with these three rates. However, counterfactual simulations suggest that only the changes in after-tax prices of health insurance were found to appreciably influence the trends in these rates, though in the opposite direction of the actual declining trend for the rate of self-employment of new entrants.
Article
Full-text available
This article examines the impact of the Affordable Care Act on premiums by studying a segment of the nongroup market, the self-employed. Because self-employed health insurance premiums are deductible, tax data contain comprehensive individual-level information on the premiums paid by this group prior to the establishment of health insurance exchanges. We compare these prior premiums to reference silver premiums available on the exchanges and find that exchange premiums are 4.2 percent higher on average among the entire sample but 42.3 percent lower on average after taxes and subsidies. We also examine which type of exchange coverage would cost less than the individual's prior health insurance premiums and find that almost 60 percent of families could purchase bronze plans for less than their prior premiums, though only about a quarter could purchase platinum plans. After taxes and subsidies, the fractions increase to over 85 percent for bronze plans and over half for platinum plans. Copyright © 2015 by Duke University Press.
Article
Full-text available
One goal of the Affordable Care Act (ACA) was to enable entrepreneurship by increasing access to non-employer-based health insurance. We evaluate the extent to which the ACA was successful at this, providing some of the first estimates of the effect of the main provisions of the ACA on entrepreneurship. We are the first to focus specifically on older adults, whose higher average health costs and health insurance premiums make health insurance more salient to their labor market decisions. We do so using data from the American Community Survey and a difference-in-difference strategy, taking advantage of Medicare-eligibles as a control group less affected by the ACA. We find that the ACA led to a 3–4% increase in self-employment. We find similar increases in the likelihood of being self-employed in an incorporated business and of generating at least $5000 in business income, as well as a 9% increase in the likelihood of being self-employed full time. By lowering the cost of non-employer health insurance policies to older adults, the ACA appears to have eased their transition from employment to self-employment.
Article
This paper identifies the effect of the Affordable Care Act’s dependent coverage mandate on health insurance coverage and labor market outcomes among young adults by exploiting the discrete change in health insurance coverage at age 26. Using a regression discontinuity design, we find that aging out from the ACA’s dependent coverage mandate is associated with up to a 4.2-percentage-point decrease in private insurance coverage at age 26. We also find that aging out from the mandate is significantly associated with an increase in the probability of being employed. However, we do not find any significant changes in hourly wage, weekly working hours or job mobility at age 26.
Article
Previous researchers have shown that employment-based health insurance lowers job mobility and deters entrepreneurship. The Urban Resident Basic Medical Insurance (URBMI) program, piloted in 2007 in China and fully established in 2009, offers health insurance to about 271 million urban residents without formal employment. Before the implementation of URBMI, most urban residents obtained health insurance through their employers, and therefore a large number of unemployed and self-employed individuals were uninsured. Thus, URBMI creates a new insurance option that does not depend on formal employment and may promote entrepreneurship. We take advantage of this policy change to evaluate the effect of URBMI on self-employment. Using 2000-2011 data from the China Health and Nutrition Survey and a difference-in-differences approach with propensity score weighting, we found that URBMI increased self-employment rate by at least 8.73% for the overall population. The result was mainly driven by the URBMI’s impact on unhealthy workers, individuals with 12 years of schooling or less, and workers above 30 years old.
Article
Full-text available
This paper assesses the impact of employer-provided health insurance on job mobility by exploring the extent to which workers are “locked” into their jobs because preexisting conditions exclusions make it expensive for individuals with medical problems to relinquish their current health insurance. I estimate the degree of job-lock by comparing the difference in the turnover rates of those with high and low medical expenses for those with and without employer-provided health insurance. Using data from the 1987 National Medical Expenditure Survey, I estimate that job-lock reduces the voluntary turnover rate of those with employer-provided health insurance by 25 percent, from 16 percent to 12 percent per year.
Article
Full-text available
This paper analyzes the role of liquidity constraints in the formation of new entrepreneurial enterprices. The basic empirical strategy is to determine whether an individual's wealth affects the probability of becoming an entrepreneur, and the conditional amounts of depreciable assets and interest deductions, ceteris paribus. If so, liquidity constraints are likely to be present. To be successful, such a research strategy requires a measure of asset variation that is both precisely measured and exogenous to the entrepreneurial decision. Our data are uniquely well-suited for this purpose. The sample consists of the 1981 and 1985 federal tax returns of a group of people who received inheritances in 1982 and 1983, along with information on the size of those inheritances from a matched set of estate tax returns. Hence, we can examine how the exogenous receipt of capital affects the decision to become an entrepreneur and important financial characteristics of new enterprises. Our results suggest that the size of the inheritance has little effect on the probability of becoming an entrepreneur, but that conditional on becoming an entrepreneur, the size of the inheritance has a statistically significant and quantitatively important effect on the amount of capital employed. The conditional elasticity is 0.45. Thus, liquidity constraints matter, but not in the fashion suggested in some earlier investigations.
Article
Full-text available
We estimate how cost sharing, the portion of the bill the patient pays, affects the demand for medical services. The data come from a randomized experiment. A catastrophic insurance plan reduces expenditures 31 percent relative to zero out-of-pocket price. The price elasticity is approximately -0.2. We reject the hypothesis that less favorable coverage of outpatient services increases total expenditure (for example, by deterring preventive care or inducing hospitalization).
Article
We examine the labor-supply implications of universal health coverage by studying individuals who receive insurance through their spouses' employers. We find that spousal coverage has the largest impact on the labor-supply behavior of wives. Wives with spousal coverage have participation rates that are 19.5 percentage points lower and work on average 7.1 to 14.8 percent fewer hours annually than otherwise similar wives. Husbands with spousal coverage have participation rates that are 4.1 to 9.1 percentage points lower and supply less than 3.6 percent fewer hours. These estimates suggest that universal health coverage would reduce the labor supply of the U.S. population by approximately 6.2 percent annually.
Book
Labor Supply is a survey of and critical guide to recent theoretical and empirical work on labor supply models, both static and dynamic. The chapters on recent empirical studies and on dynamic models are of particular interest, because neither topic has so far been discussed in any detail in standard texts. Integrated within this survey is an extensive discussion of public policy issues relating to labor supply, including income transfer programs, such as welfare and Social Security, and the income tax system. A concluding chapter discusses secular trends in labor supply in the U.S. economy, in particular the long-run increase in female labor force participation.
Article
This paper examines the determinants of self-employment among married women. The study uses these results to assess the impact of selectivity bias, due to self-employment decisions, on the earnings of wage/salary and self-employed workers.
Article
We investigate the effects of employer-provided health insurance on the labor supply of married women. Because health benefits commonly are restricted to full-time workers, wives who prefer to work short hours but have no alternate source of insurance may work long hours in order to acquire coverage for their families. We use data from the April 1993 Current Population Survey Benefits Supplement, and we exploit variation in coverage under husbands' health plans to estimate the magnitude of this effect. Our reduced-form labor supply models indicate a strong negative effect of husbands' health insurance on wives' work hours, particularly in families with children. This effect persists when we replace husbands' insurance coverage with husbands' offered insurance, and when we use a multinomial logit model that accounts for unobserved heterogeneity in family labor supply preferences.
Article
The McElroy-Horney Nash-bargaining model of family demand behavior relaxes the restriction that nonearned income of husband and wife had the identical effect on family labor supply and commodity demands. This restriction of the neoclassical model of family behavior is tested for the determination of husband and wife labor supply and fertility based on the 1981 Socioeconomic Survey of Thailand. The neoclassical restriction is rejected for female labor supply and fertility. Another unexplored limitation of family demand studies, due to the sample self selection of intact marriages, is empirically treated through alternative estimation strategies. In this case, a more sharply focused theory of marital behavior is needed to identify family demand models.
Article
This paper discusses some issues in the empirical implementation of game theoretic models of household labor supply. In particular we focus on the identification problems inherent in many of these models. As an illustration, we estimate a game theoretic model which uses data on preferred working hours as additional identifying information.
Article
Labor supply functions for married men and women are formulated as a dynamic simultaneous equations system , which is estimated using panel data. Controlling for fixed individu al effects allows marginal labor supply responses to be disentangled from permanent patterns in hours worked due to assortative mating. Th e results suggest that the labor supply of husbands and wives without preschool children is not jointly determined in the short run, while families with young children exhibit strong interactions in work hou rs and negative cross-earnings effects. Neither the joint utility mod el of family labor supply nor an ad hoc "traditional family" model is supported by these results. Copyright 1988 by MIT Press.
Article
The Tax Reform Act of 1986 introduced a new tax subsidy for health insurance purchases by the self-employed. We analyze the changing patterns of insurance demand before and after tax reform to generate new estimates of how the after-tax price of insurance affects the discrete choice of whether to buy insurance. We employ both traditional regression models and difference-in-difference methods that compare changes in insurance coverage across groups around TRA86. The results from our most carefully controlled comparison suggest that a 1 percent increase in the cost of insurance coverage reduces the probability that a self-employed single person will be insured by 1.8 percentage points.
Article
This paper considers self-employment and providing child care as occupational strategies that can lower the cost of child care. If the ability to care for one's own children while engaged in market work is important to mothers with young children, we predict that women with young children will be more likely to choose to be self-employed or to be a child care provider than women without young children. The analysis provides strong support for this hypothesis. The results show that the presence of young children is an important factor in choosing self-employment and in choosing to be a child care provider. Finally, simulations are presented which show that a woman's choice among these sectors is quite sensitive to the number and ages of her young children.
Article
Health insurance obtained through employment has enabled many workers to take advantage of the favorable tax treatment of employer contributions to these benefits. However, the full deductibility of such employer payments as a business expense and their exemption from income taxation are not available to self-employed owners of unincorporated businesses. We identify the sources of health insurance for the self employed and examine how this disparity in tax treatment is associated with health insurance status. Analyses of data from the 1987 National Medical Expenditure Survey reveal that the differential taxation of the unincorporated self employed is associated with lower rates of employment-related coverage for themselves and their workers.
Article
Ever since Schumpeter identified the 'animal spirits' of entrepreneurs as the driving force of markets, researchers have been trying to determine who is an entrepreneur and what factors breed entrepreneurial success. Using data from the National Longitudinal Surveys of Youth, the authors first determine who pursues self-employment in their youth and then who succeeds. There is a surprisingly high incidence of self-employment but very low success rates. Significant correlates of both entry into self-employment and eventual success differ markedly by gender. Copyright 1997 by Oxford University Press.
Article
A steady increase in the number of females choosing to work for themselves, instead of someone else, represents one of the more striking recent trends in the US labor market. This trend raises an obvious question, namely, what was happening to female earnings opportunities in self-employment, relative to earnings opportunities in wage-and-salary employment? Findings presented in this paper indicate the following: self-employment increased more for females who faced increasing potential earnings in wage-and-salary employment, suggesting that returns to skill were increasing by even more in self-employment; increasing relative returns to skill may explain at least part of the recent rise in female self-employment; there is an absence of a sharp difference in self-employment rates between women in the top and middle segments of the skill distribution: women with relatively low skill levels who faced declining real wages in wage-and-salary employment did not turn to self-employment in the same proportions as women with higher skill levels. Results presented here suggest that the recent rise in female self-employment may have added to the increasing earnings inequality that has been documented previously for females in wage-and-salary employment, a finding that is clearly worth further investigation. -from Author
Article
We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 financial crisis. In addition to widely used VaR and ES models, we also study the behavior of conditional and unconditional extreme value (EV) models to generate 99 percent confidence level estimates as well as developing a new loss function that relates tail losses to ES forecasts. Backtesting results show that only our proposed new hybrid and Extreme Value (EV)-based VaR models provide adequate protection in both developed and emerging markets, but that the hybrid approach does this at a significantly lower cost in capital reserves. In ES estimation the hybrid model yields the smallest error statistics surpassing even the EV models, especially in the developed markets.
Article
The evidence presented in this paper casts doubt on the proposition that pension backloading is responsible for the low job mobility rates observed for pension covered workers. It corroborates earlier findings by the authors, based on different data, that pension covered jobs offer higher levels of compensation than workers can obtain elsewhere, and it is this compensation premium, rather than non-portability, that accounts for lower turnover among pension covered workers. This evidence is further bolstered by the finding that defined contribution plans, which are not backloaded, and defined benefit plans, bear similar negative relations to mobility.
Article
Explores the factors that lead individuals into self-employment. Although many recent studies have furthered understanding of the role of small businesses in the economy, some key factors have not yet been considered. This study uses longitudinal data focused on white males in the U.S., between the ages of 18 and 65. Data were obtained from the National Longitudinal Survey of Young Men and Current Population Surveys, between 1966 and 1987. Seven key findings are presented: (1) the probability of switching into self-employment is roughly independent of age and total labor-market experience; (2) the probability of departing from self-employment decreases with duration in self-employment; (3) the fraction of the labor force that is self-employed increases with age until the early 40s and then remains constant until the retirement years; (4) with all else equal, men with greater assets are more likely to switch into self-employment; (5) while business experience has approximately the same return for wage work and self-employment, wage experience has a significantly smaller return in self-employment; (6) with all else equal, poorer wage workers are more likely to enter self-employment or to be self-employed at a point in time; and (7) those men who believe that their performance depends on their own actions have a greater propensity to start a business. These results are consistent with the disadvantage theory which views entrepreneurs as misfits cast off from wage work and the psychological theory which is based on the internal locus of control. (SRD)
Limited Insurance Porta-bility and Job Mobility NBER Working Paper No. 4479 Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed
  • J Gruber
  • B Madrian
  • J Gruber
  • J Poterba
Gruber, J., and B. Madrian. " Limited Insurance Porta-bility and Job Mobility. " NBER Working Paper No. 4479, 1993. Gruber, J., and J. Poterba. " Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed. " Quarterly Journal of Economics, 109, 1994, 701–33.
Part-Time Work, Health Insurance Cover-age and the Wages of Married Women Entrepreneurial Ori-gins: A Longitudinal Inquiry
  • C Olson
  • B R Schiller
  • P E Crewson
Olson, C. A. " Part-Time Work, Health Insurance Cover-age and the Wages of Married Women. " Mimeo. University of Wisconsin-Madison, 1995. Schiller, B. R., and P. E. Crewson. " Entrepreneurial Ori-gins: A Longitudinal Inquiry. " Economic Inquiry, 35(3), 1997, 523–31.
Some Displaced Executives Buy Their Own Franchises Investor's Daily
  • M L Johnson
Johnson, M. L. " Some Displaced Executives Buy Their Own Franchises. " Investor's Daily, August 28, 1991.
Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment
  • Manninag
Employer-Provided Health Insurance and Worker Mobility: ‘Job-Lock’ or Not
  • Buchmueller
Some Displaced Executives Buy Their Own Franchises
  • Johnson