Health Insurance and the Supply of Entrepreneurs: Evidence from the ACA Medicaid Expansion

Abstract

I examine whether the expansion of Medicaid eligibility under the Affordable Care Act increases the supply of entrepreneurs as measured by self-employment. Using the 2003–2017 Current Population Survey and focusing on childless adults in low-income households, I apply difference-in-differences, propensity score weighting, and instrumental variable (IV) methods. I find that expanding Medicaid eligibility raises the self-employment rate by 0.8 to 1.6 percentage points, without increasing self-employment exit. IV estimates imply that covered individuals have 8 to 11 percentage points higher probability to become self-employed. In the analysis of policy heterogeneity, I find evidence that the underlying mechanism of the effect was through the reduction of entrepreneurship lock. The results suggest that limited access to health insurance may be a barrier to entrepreneurship.