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

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

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. 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.
  2. 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).
  3. Gulcin Gumus & Tracy Regan, 2006. "Tax Incentives as a Solution to the Uninsured: Evidence from the Self-Employed," Working Papers 0911, University of Miami, Department of Economics, revised Oct 2008.
  4. 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.
  5. Gruber, Jonathan & Poterba, James, 1994. "Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 701-33, August.
  6. Fairlie, Robert W. & Kapur, Kanika & Gates, Susan, 2010. "Is Employer-Based Health Insurance a Barrier to Entrepreneurship?," IZA Discussion Papers 5203, Institute for the Study of Labor (IZA).
  7. 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).
  8. 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.
  9. 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.
  10. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  11. 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.
  12. 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.
  13. 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.
  14. Alison J. Wellington, 2001. "Health Insurance Coverage And Entrepreneurship," Contemporary Economic Policy, Western Economic Association International, vol. 19(4), pages 465-478, October.
  15. 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.
  16. Holtz-Eakin, Douglas & Penrod, John R. & Rosen, Harvey S., 1996. "Health insurance and the supply of entrepreneurs," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 209-235, October.
  17. 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.
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