The effect of self-employed health insurance subsidies on self-employment |
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Authors: | Bradley T. Heim Ithai Z. Lurie |
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Affiliation: | 1. Office of Tax Analysis, U.S. Department of Treasury, 1500 Pennsylvania Ave NW, Washington, DC 20220, United States;2. School of Environmental and Public Affairs, Indiana University, 1315 East 10th St, Bloomington, IN 47405, United States |
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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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