Do Health Care Insurance Expenditures and State Policies Affect State Self-Employment Rates?

Abstract

Previous research on self-employment has focused on employers asinsurance-providers or how individuals make job choices under health insuranceconstraints. We add to the literature by examining whether certain health insurance factorsdetermine the self-employment rate at the state level. One explored variable is the percapita health insurance expenditure for states. Using panel data for the years 1999-2004,a random effects model indicates that per capita private health expenditures reduce thestate self-employment rate. We also analyze the impact of state health insuranceregulations that support small businesses and self-employment. The results indicate thatthose states with relatively strict limits on health insurance premiums charged to smallbusinesses or the self-employed have higher average self-employment rates. The mandatemay be reducing the cost difference between paid and self-employed workers, making thedecision between paid and self-employment less about health insurance costs. And, ifhealth insurance costs distort the choice between the two labor market paths, stateregulation on carriers, at least as they relate to premiums, may be leading to economicdecisions that are more socially efficient. (J48, I13)