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• Working Paper | HBS Working Paper Series | 2016

  Immigrant Entrepreneurs and the Social Safety Net

  Gareth Olds

  This paper explores the role of public health insurance in small business ownership among immigrants, a group with high rates of entrepreneurship. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 created a five-year “waiting period” for legal immigrants to receive federal benefits. However, when the State Child Health Insurance Program was passed in the following year, 15 states chose to insure newly arrived immigrant children with local funds. Using a triple-difference identification strategy, I show that these policies made families with foreign-born members 21% less likely to have uninsured children compared to the pre-policy baseline. These households were also 20% more likely to be self-employed and 28% more likely to own an incorporated business. The increase operates mainly through increases in firm birth rates but survival rates are also higher. The increase in firm ownership comes mostly from families whose children were already insured, suggesting public health insurance increases business ownership by reducing the risks of losing coverage.

  Keywords: Insurance; Entrepreneurship; Welfare or Wellbeing; Immigration;

  Citation:

  Olds, Gareth. "Immigrant Entrepreneurs and the Social Safety Net." Harvard Business School Working Paper, No. 16-142, June 2016.  View Details

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• Working Paper | HBS Working Paper Series | 2016

  College Tuition, Public Finance and New Business Starts

  Gareth Olds

  A growing public discourse cites the rising cost of education and student debt overhang as a contributor to slow economic growth. A parallel discussion explores the causes of the secular decline in business dynamism and entrepreneurship rates in the United States over the past several decades. This study is an attempt to connect these two narratives. I provide early evidence that the growth of public university tuition over the previous two decades is negatively associated with movement into self-employment. Because labor market and education decisions are often made together, I focus on shocks to in-state tuition among parents of near-college-age children, who may internalize the cost of their children’s education but are less likely to be attending college themselves. Using state budget surpluses and shortfalls as an instrument for in-state tuition in a triple-difference framework, I find that a 10% increase in the average price of in-state tuition is associated with a 13.9% decrease in new business starts of parents with college-age children in the CPS, relative to both non-parents and parents of younger children. A one percentage-point increase in the growth rate of in-state tuition is associated with a 3.8% decline in new firm births. The effect is similar in size and significance when aggregating to the household level and when including a standard battery of covariates. The instrument is orthogonal to private school tuition rates, and the effects are stronger for households with more children and those with children closest to college age. Taken together, the results indicate that the rising cost of higher education may be partially responsible for the decline in new business starts in the United States.

  Keywords: Cost; Higher Education; Entrepreneurship;

  Citation:

  Olds, Gareth. "College Tuition, Public Finance and New Business Starts." Harvard Business School Working Paper, No. 16-145, June 2016.  View Details

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• Working Paper | HBS Working Paper Series | 2016

  Food Stamp Entrepreneurs

  Gareth Olds

  This paper explores how eligibility for the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamps Program) affects firm formation. Using a variety of identification strategies, I show that expanded SNAP eligibility in the mid-2000s increased enrollment by 3–5 percentage points. Newly eligible households were also 20% more likely to own a business, with larger effects for incorporated firms. I find large increases in labor supply on the extensive and intensive margins, equivalent to 1.1 million additional workers. I also develop a series of falsification checks that use information from unaffected portions of the income distribution to improve RD estimates. This strategy improves balance on observables between treatment and control groups, and Monte Carlo simulations find a significant reduction in Type 1 Error. Finally, I show that the empirical results are driven entirely by newly eligible households that did not enroll, suggesting uninsured risk from leaving wage employment is the primary barrier to entrepreneurship for this population.

  Keywords: Entrepreneurship; Welfare or Wellbeing;

  Citation:

  Olds, Gareth. "Food Stamp Entrepreneurs." Harvard Business School Working Paper, No. 16-143, June 2016.  View Details

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