Pursuit of Truthiness

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Posts Tagged ‘Self-employment

The ACA and Entrepreneurship

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In a newly published paperDhaval Dave and I tried to assess how the Affordable Care Act affected entrepreneurship. Many people have been speculating about this, but very few have actually tried to measure it. Part of the reason for this is that the appropriate data only recently became available; most earlier work, including my dissertation, had to focus on the relatively minor parts of the ACA that started earlier, while the biggest provisions didn’t kick in until 2014.

So, did the ACA help or hinder entrepreneurship? In short, it probably helped, but with huge heterogeneity. In our paper we compare entrepreneurship rates for people in their early 60’s (who might benefit from the availability of individual insurance through the ACA) with a “control group” of people in their late 60’s (who are eligible for Medicare and presumably less affected by the ACA). We find that the ACA led to a 3-4% increase in self-employment for people in their early 60’s.

So, should we take that estimate and extrapolate it to everyone, and use that to imply that the ACA created a million businesses? I don’t think so. I expect that the biggest positive effect of the ACA was for exactly the group we studied- people in their early ’60s. Both because they are old enough to have substantial average health costs and health insurance premiums  (so they will factor health insurance into their decisions more strongly than younger people) and because of the community rating provisions of the ACA (which generally reduced individual premiums for older people while raising them for younger people). The other new papers on the ACA and entrepreneurship use identification strategies that let them study adults of most ages, and they generally find no effect or smaller positive effects.

If I do more work on the ACA specifically, it will be to probe the effects on other subgroups that I expect to have particularly positive effects (e.g. less healthy people) or negative effects (e..g young, health people). Alternatively, we can start to look to post-ACA data and assess to what extent entrepreneurship lock remains a problem even after the full ACA implementation.

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Written by James Bailey

September 25, 2018 at 2:04 pm