Did the ACA reduce job-lock and spur entrepreneurship?
| DOI | https://doi.org/10.1108/JEPP-09-2016-0032 |
| Pages | 150-163 |
| Date | 21 August 2017 |
| Published date | 21 August 2017 |
| Author | Simon Condliffe,Matt B. Saboe,Sabrina Terrizzi |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Did the ACA reduce job-lock and
spur entrepreneurship?
Simon Condliffe and Matt B. Saboe
Department of Economics, West Chester University of Pennsylvania,
West Chester, Pennsylvania, USA, and
Sabrina Terrizzi
Department of Economics and Business, Moravian College, Bethlehem,
Pennsylvania, USA
Abstract
Purpose –The purpose of this paper is to assess the effect of the recent Affordable Care Act’s (ACA)
Dependent Mandate (DM) that requires health insurers to extend dependent coverage to the children of their
insured, up to age 26. The DM has the potential to free young persons from “job lock,”enabling them to
engage in entrepreneurial activity. Using the American Community Survey, the authors analyze the change in
self-employment for ages 18-25 relative to the implementation of the DM.
Design/methodology/approach –The authors approach the research question in a unique manner and in
doing so, extend the literature. Employing national data, the authors focus on young adults impacted by the
DM (those under the age of 26 may remain on their parents’insurance). While the DM is a condition of
the ACA, prior to its implementation several states had already passed their own such provision. The authors
exploit this state-by-state variation in the methodology.
Findings –The authors find no evidence that the ACA has stimulated self-employment among all young
adults. However, the authors determine that the DM has a positive and significant effect on the likelihood of
students being self-employed. The result is even more pronounced when using a stricter definition
of entrepreneurship, an incorporated business. Sub-group analyses show no evidence of a significant effect on
entrepreneurship among young adults in other groups. The results remain after conducting various
falsification tests.
Originality/value –The paper empirically addresses the commonly held belief that the ACA is creating new
businesses via reduced job lock. Policy makers may wish to target other explanations of job lock rather than
health insurance availability.
Keywords Entrepreneurs, Affordable Care Act, Dependent mandate, Job lock
Paper type Research paper
1. Introduction
Health insurance availability is a significant factor in labor market decisions (Aggarwal
et al., 2013; DeCicca, 2010; Fairlie et al., 2011; Madrian, 1994). Employer-based insurance can
offer desirable characteristics for workers: subsidized group insurance and negotiated lower
premiums based on group risk assessment. If an individual decides to leave his or her job to
engage in self-employment, obtaining affordable, quality coverage through the individual
market is a large concern. The Patient Protection and Affordable Care Act (ACA) aims to
increase insurance access for all ages. While certain provisions of the ACA have been
phased in over several years, one group was affected early in the process: dependents under
the age of 26. These individuals can now remain on their parent’s insurance (henceforth
known as the Dependent Mandate (DM)[1]). Further, it is noteworthy that many states
adopted a DM prior to the implementation of the ACA (Goda et al., 2016). We focus our
analysis on the effect of the ACA 2010 DM on entrepreneurship among young adults, while
using variation in prior state-level DMs for identification.
There is concern among policy makers and economists that young adults seeking jobs
will focus solely on employers that provide health insurance. Young adults that may have
Journal of Entrepreneurship and
Public Policy
Vol. 6 No. 2, 2017
pp. 150-163
© Emerald PublishingLimited
2045-2101
DOI 10.1108/JEPP-09-2016-0032
Received 4 September 2016
Revised 27 March 2017
Accepted 29 March 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
JEL Classification —I18, I13, J68
150
JEPP
6,2
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