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The Impact Of Insurance Subsidies On Self-Employment:Do State Non-Group Health Insurance Regulations Matter?
This paper tests whether the effect of tax-based subsidies for self-employed health
insurance on the level of self-employment differs with the type of non-group insurance
regulatory regime at the state level. Using a panel of tax returns from 1999 to 2004, we
estimate fixed effects instrumental variable regressions for the probability of being selfemployed,
allowing the effect of the after-tax price of self-employed health insurance
to differ by regulatory regime. Our results suggest that states with community rating
and guaranteed issue regulations had significantly smaller increases in the fraction of
taxpayers reporting some amount of self-employment income as a result of a decrease
in the after-tax price of self-employed health insurance. However, there is suggestive
evidence that heavily regulated states experienced a larger increase in exclusive selfemployment,
particularly among older taxpayers. (
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