Three Essays on Labor Supply Focusing on Entrepreneurship and Health Insurance

Abstract

This dissertation consists of three essays analyzing policies that affect different aspects of labor supply. Economists are interested in many different aspects of labor supply decisions, such as whether to participate in the labor market, amount of work conditional on participation and career choice, among others. At the same time, a wide range of policies can impact labor supply such as: tax, immigration, healthcare, and unionization policies, among others. Analyzing policies using appropriate methodology may assist policymakers by presenting alternative solutions, trade-offs, and intended and unintended consequences of economic policies. While some of these issues have been explored extensively, others remain relatively unexplored. In this dissertation, I explore three such unexplored problems. First, I analyze the dynamic decision processes of entrepreneurs. Second, I explore the impact of the cost of health insurance on entrepreneurial activities. Third, I evaluate the effect of the availability of health insurance on workplace absenteeism.The first essay explores what induces individuals to become entrepreneurs creating jobs. Extant structural labor supply models used for ex-ante policy evaluations mostly exclude entrepreneurs. The first essay develops and estimates the first dynamic structural micro-econometric model explicitly accounting for the employer and non-employer entrepreneurs. In the model, individuals in each period choose to work as an employee, as one of the two entrepreneur types, or be non-employed. Different types of work experiences may affect earnings in the three careers in different ways. The model, estimated using German survey data, replicates key data patterns. This essay simulates how policy scenarios would affect individuals' choices to become employers and non-employers.The second essay explores whether the cost of health insurance affects entry into entrepreneurship. Entrepreneurship literature argues that a lack of access to health insurance is a potential barrier to become an entrepreneur (entrepreneurship lock), especially for individuals with a chronic health condition. Several papers have explored whether the guaranteed availability of health insurance brought about by the Affordable Care Act (ACA) of 2010 has increased the level of entrepreneurship, with conflicting results. However, the current literature focuses only on the availability of health insurance but not the cost of obtaining insurance. This essay explores whether the cost of health insurance rather than availability is a barrier to entrepreneurship. The results suggest that the probability of entry into self-employment is not sensitive to health insurance premiums.The third essay examines whether the expansion of health insurance coverage brought on by the Patient Protection and Affordable Care Act of 2010 (ACA), led to a decline in absenteeism among overweight and obese individuals. This essay uses data from the National Health Interview Survey (NHIS) to compare absenteeism among overweight and obese workers to absenteeism among normal-weight workers before and after the ACA. Results suggest that in the post-ACA period, the probability of being absent declined by about 1.3 (1.5) percentage points among obese (overweight) individuals. Disaggregated regressions suggest that the effect is significant among women but not among men. Furthermore, estimates (using a Tobit model) indicate that the obese (overweight) workers missed 0.32 (0.48) fewer days after the ACA. Again, the effect is concentrated among women. Results show that improved health outcomes led to reduced absenteeism. Results also show that there is no decline in absenteeism among elderly (age>=65) adults (who did not experience any increase in health insurance coverage as a result of the ACA), suggesting that the decline in absenteeism is indeed due to the expansion of health insurance coverage due to the ACA. Estimates of this essay imply that the ACA reduced the cost associated with absenteeism by about $350 million per year.