Is employer-based health insurance a barrier to entrepreneurship?

Robert Fairlie, Kanika Kapur and Susan M. Gates

No 200903, Working Papers from School of Economics, University College Dublin

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.

Keywords: Employer-sponsored health insurance--United States; Entrepreneurship--United States; Businesspeople--Health and hygiene (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-bec, nep-ent, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://hdl.handle.net/10197/1008 First version, 2009 (application/pdf)

Related works:
Journal Article: Is employer-based health insurance a barrier to entrepreneurship? (2011)
Working Paper: Is Employer-Based Health Insurance a Barrier to Entrepreneurship? (2010)
Working Paper: Is Employer-Based Health Insurance a Barrier to Entrepreneurship? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:200903

Access Statistics for this paper

More papers in Working Papers from School of Economics, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Nicolas Clifton ().