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The effect of self-employed health insurance subsidies on self-employment

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  • Heim, Bradley T.
  • Lurie, Ithai Z.

Abstract

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 increased the probability of being self-employed by 1.5 percentage points, and increased the probability that a taxpayer would be primarily or exclusively self-employed by 1.1 and 0.35 percentage points respectively. These effects explain about a third to a half of the total increase in self-employment by these definitions over the sample period. We also find that the probability of entering self-employment increased by 0.8 percentage points and find suggestive evidence that the probability of exit decreased by 2.8 percentage points.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 94 (2010)
Issue (Month): 11-12 (December)
Pages: 995-1007

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Handle: RePEc:eee:pubeco:v:94:y:2010:i:11-12:p:995-1007

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Self-employment Health insurance Exit and entry Tax deduction;

References

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  1. Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September.
  2. Robert W Fairlie & Kanika Kapur & Susan Gates, 2010. "Is Employer-Based Health Insurance a Barrier to Entrepreneurship?," Working Papers 200903, School Of Economics, University College Dublin.
  3. Gumus, Gulcin & Regan, Tracy L., 2009. "Self-Employment and the Role of Health Insurance," IZA Discussion Papers 3952, Institute for the Study of Labor (IZA).
  4. Heim, Bradley T. & Lurie, Ithai Z., 2009. "Do increased premium subsidies affect how much health insurance is purchased? Evidence from the self-employed," Journal of Health Economics, Elsevier, vol. 28(6), pages 1197-1210, December.
  5. Tracy L. Regan & Gulcin Gumus, 2006. "Tax Incentives as a Solution to the Uninsured: Evidence from the Self-Employed," Working Papers 0709, University of Miami, Department of Economics, revised Oct 2007.
  6. Robert W. Fairlie & Bruce D. Meyer, . "Trends in Self-Employment Among White and Black Men: 1910 - 1990," IPR working papers 99-1, Institute for Policy Resarch at Northwestern University.
  7. Jonathan Gruber & James M. Poterba, 1993. "Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed," NBER Working Papers 4435, National Bureau of Economic Research, Inc.
  8. Douglas Holtz-Eakin & John R. Penrod & Harvey S. Rosen, 1994. "Health Insurance and the Supply of Entrepreneurs," NBER Working Papers 4880, National Bureau of Economic Research, Inc.
  9. Lo Sasso, Anthony T. & Lurie, Ithai Z., 2009. "Community rating and the market for private non-group health insurance," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 264-279, February.
  10. Parker, Simon C, 1996. "A Time Series Model of Self-Employment under Uncertainty," Economica, London School of Economics and Political Science, vol. 63(251), pages 459-75, August.
  11. Brigitte C. Madrian, 1993. "Employment-Based Health Insurance and Job Mobility: Is There Evidence ofJob-Lock?," NBER Working Papers 4476, National Bureau of Economic Research, Inc.
  12. Thomas M. Selden, 2009. "The Impact of Increased Tax Subsidies on the Insurance Coverage of Self-Employed Families: Evidence from the 1996–2004 Medical Expenditure Panel Survey," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
  13. Jonathan Gruber & Brigitte C. Madrian, 2002. "Health Insurance, Labor Supply, and Job Mobility: A Critical Review of the Literature," NBER Working Papers 8817, National Bureau of Economic Research, Inc.
  14. Jon Bakija, 2006. "Documentation for a Comprehensive Historical U.S. Federal and State Income Tax Calculator Program," Department of Economics Working Papers 2006-02, Department of Economics, Williams College, revised Aug 2009.
  15. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  16. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
  17. Alison J. Wellington, 2001. "Health Insurance Coverage And Entrepreneurship," Contemporary Economic Policy, Western Economic Association International, vol. 19(4), pages 465-478, October.
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Citations

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Cited by:
  1. Azuara, Oliver & Marinescu, Ioana, 2013. "Informality and the expansion of social protection programs: Evidence from Mexico," Journal of Health Economics, Elsevier, vol. 32(5), pages 938-950.
  2. Azuara, Oliver & Marinescu, Ioana, 2011. "Informality and the expansion of social protection programs," MPRA Paper 35073, University Library of Munich, Germany.
  3. Azuara, Oliver, 2011. "Effect of universal health coverage on marriage, cohabitation and labor force participation," MPRA Paper 35074, University Library of Munich, Germany.

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