Understanding the decline in self-employment among individuals nearing retirement

This paper examines the sources of the decline in self-employment among near-retirees over 1994-2012. Using Current Population Survey data, tabulations imply that the decline was driven by an increase in the exit rate to wage and salary employment, a decline in the rate of self-employment among new entrants into this age cohort, and an increase in the share of these new entrants. Multinomial logits suggest that health insurance coverage and after-tax prices of health insurance were significantly associated with these three rates. However, counterfactual simulations suggest that only the changes in after-tax prices of health insurance were found to appreciably influence the trends in these rates, though in the opposite direction of the actual declining trend for the rate of self-employment of new entrants.