Health Insurance and the Supply of Entrepreneurs: New Evidence from the Affordable Care Act's Dependent Coverage Mandate
James B. Bailey
Creighton University - Department of Economics; Temple University - Department of Economics
March 7, 2013
Is difficulty of purchasing health insurance as an individual or small business a major barrier to entrepreneurship in the United States? 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. This mandate provides a means to estimate the number of potential entrepreneurs discouraged by the current system of employer-based health insurance. A difference-in-difference strategy finds that the dependent coverage mandate led to a 13-24% increase in self-employment among the treated group. The effect is found to be larger for women and for unincorporated businesses. An instrumental variables strategy finds that those actually receiving health insurance coverage as dependents were much more likely to start businesses.
Number of Pages in PDF File: 21
Keywords: Health Insurance, Entrepreneurship, Affordable Care Act, Dependent Coverage Mandate
JEL Classification: L26, J20, I13, I18, M13working papers series
Date posted: March 9, 2013 ; Last revised: July 17, 2014
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