Entrepreneurship and the consequences of healthcare policy

Abstract

Purpose – The purpose of this paper is to examine the long-run impact of federal government healthcare subsidies on the level of entrepreneurship as measured by self-employment. Design/methodology/approach – Using annual healthcare and employment data from 1948 through 1999, the paper empirically examines the relationship between the growth in employer-provided healthcare and the rate of self-employment as a share of the non-agriculture, civilian labor force. Findings – The regression results imply that there is a consistent effect that has appeared over time – where federal healthcare subsidies have disproportionately benefitted larger firms, contributing to the decline in the rate of self-employment, within-firm innovation, and factor mobility over time. Research limitations/implications – The research in this study is limited by the examination of self-employment only and a constant institutional structure across all states, only varying across time for the entire USA. In addition, an empirical study looking at how the value of healthcare benefits have changed over time – vs the sole question in this study that depends upon whether or not an individual is covered or not would be very useful in determining the true effect on an entrepreneur. Social implications – Reducing or removing the layers of healthcare subsidies would bring about an increase in the transparency of the wage-productivity relationship and a more efficient allocation of labor and entrepreneurial ability across firm sizes. Originality/value – This paper presents empirical evidence supporting specific improvements to national healthcare policy at a time when such policy is undergoing significant change with consequences for entrepreneurial decision making.