Health Insurance, Job Lock, and the Supply of Self-Employment

Unlike most wage earners, self-employed Americans have limited access to health insurance and face higher costs. Thus, social commentators and policymakers argue that many potential entrepreneurs are "locked" into their current jobs for fear of losing their health coverage even though they could be more productive in self-employment. Using a large data set for the period 2000-2008, we find the availability of employer-provided health insurance to be negatively correlated to the likelihood of self-employment in the long run, but the effect to be mediated by individual and family health status. However, we find employer-provided health insurance to have no significant effect on the probability of switching in the short run. Finally, we find differences in the magnitude of the effects between our samples of husbands and wives.