Taxes, Health Insurance and Women’s Self-Employment

I examine whether the availability of health coverage through the spouse’s health plan influences a married woman’s decision to become self-employed. The Tax Reform Act of 1986 (TRA86) introduced a tax subsidy for the self-employed to purchase their own health insurance. I test whether this ‘natural’ experiment induced more women without spousal health insurance cov-erage to select into self-employment. The difference-in-difference estimates based on an analysis of employed women indicate that the incidence of self-employment among women who did not enjoy spousal health benefits rose significantly - between 14% and 25% - in the post-TRA86 pe- riod, while a multinomial specification based on a sample of both employed and non-employed women suggests that the increase was around 9%.