Mandate-based Health Care Reform and Business Activity:
Evidence from Massachusetts
Nadia Greenhalgh-Stanley
Department of Economics, Kent State University
466 College of Business
Kent, OH 44242
ngreenha@kent.edu
Shawn Rohlin
Department of Economics, Kent State University
454 College of Business
Kent, OH 44224
srohlin@kent.edu
1
Abstract
Recently mandate-based health care reform has been one of the most hotly debated public policy
issues. Debates on the merits of health care reform weight the benefits of universal health care
coverage with the costs associated with providing such coverage. There is particular concern
that businesses bear the burden of such policies and may respond by reducing employment or
change their decision to stay in business. Much of this discussion has focused on the federal
Affordable Care Act which is commonly known as “Obamacare.” The federal program is
difficult to study because the policy affected the whole United States making it difficult to
determine what would have happened absent the policy, while cross-country analysis is difficult
because countries vary so widely in their health care policies and economic environments. An
alternative to studying the Affordable Care Act is to study Massachusetts’ health care reform
because it only affected Massachusetts providing counterfactual areas. This study examines the
effect of mandate-based health care reform in Massachusetts on new, existing and total
businesses. As of April 12, 2006, firms with eleven employees or more were required to offer
employer health insurance or pay a fine, which can be used as a natural experiment. Using the
Dun and Bradstreet data and a difference-in-differences methodology augmented by a border
approach which looks at business activity one and ten miles from the Massachusetts state border,
we find the reform did distort incentives for new firms. More specifically, we find a shorter term
decrease of 1.5% of new businesses activity for firms with 11-24 employees in Massachusetts
versus the adjacent border counterfactual area, followed by a longer term increase of 6.1% in
businesses with 10 or less employees. We find no evidence of impacts on the survival rate or
employment in existing and total business. Overall, our findings suggest that new entrepreneurs
are adversely affected but not enough to affect the overall business environment. Instead we find
there is movement around the 11 employee cutoff which doesn’t impact the total business
activity in Massachusetts.
2
1. Introduction
Mandate-based health care reform, particularly related to the federal Affordable Care Act
(ACA), has been one of the most hotly debated public policy issues in recent memory.
Discussion regarding the merits of mandate-based health care reform often weighs the benefits of
expanded coverage with the costs, particularly related to how potentially detrimental such reform
is to job and business creation. While the previous literature has focused on the benefits of
expanding coverage in the United States (Currie and Gruber, 1996; Finkelstein, 2007; Finkelstein
et. al., 2012), this research project will shed light on the costs associated with such policy and in
particular, its effect on new business start-ups, existing business survival rates, and their
respective employment decisions.
Although, the federal ACA has garnered much attention, it is challenging to study
because all states are affected concurrently making it difficult to estimate what would have
happened absent the program. However, Massachusetts provides a unique opportunity to
investigate the impact of mandate-based health care costs on business creation, business survival,
and job creation because it only affects one state, as the surrounding areas did not adopt similar
policies. Additionally, the Massachusetts reform can offer some insight into the impact of the
national health care reform because many of the key features of the Massachusetts legislation
were used as a model for national reform.
Massachusetts passed reform on April 12, 2006 with the purpose of expanding access to
health care for its residents. 1 Reform affected businesses differentially depending on size.
Establishments with 11 or more employees were required to provide a cafeteria-style health plan
with the ability to use pretax earnings and to make a “reasonable” premium contribution to their
1
There were earlier attempts to institute the mandated-based health care reform however they were repealed
due to economic and budgetary concerns as well as turnover of their political leaders. The uncertainly of its
passing is cited as support for plausible exogenity.
3
employees’ health care costs. On the other hand, businesses with 10 or fewer employees were
exempt from this requirement allowing employees to take responsibility and purchase insurance
on the individual insurance market.In order to insure compliance the reform penalizes both
employers and individuals, including: $295 “fair share” assessment if employers don’t make a
“fair and reasonable” premium contribution and a free-rider surcharge to firms that do not help
contribute to employees’ health insurance. Additionally, firms with 11 or more full-time
employees that use at least $50,000 in free health care in one year may be responsible for 10 to
100 percent of the costs. Clearly all of these additional costs could affect incentives to hire
additional workers as well as affect entrepreneurs’ decisions to locate in Massachusetts. This
paper studies the location and employment decisions of new businesses (businesses with one
year or less in years of service), the survival or death rate of existing businesses (those with four
or more years of service) and their employment decisions, as well as the total effect on all
businesses for both employment and number of establishments.
Studying business location decisions poses a number of challenges because location/area
attributes, in addition to the policy environment, play vital roles in a business’s decision of where
to locate. Undoubtedly, many of these attributes are unobserved no matter the extensiveness of
one’s data set; therefore we utilize a difference-in-differences methodology in conjunction with a
border approach, utilizing the features of the policy to further control for unobserved factors.
Specifically, we study new, existing, and total establishment activity (number of firms and
employment) along the Massachusetts state border (extending 1 and 10 miles away) before and
after Massachusetts’ health care reform. The differencing methodology helps to control for timeinvariant and time-varying area characteristics that affect both the treatment and counterfactual
areas the same.
4
By focusing at the border we minimize unobserved heterogeneous area changes between
the treatment and counterfactual areas. Additionally, these adjacent counterfactual areas share
local labor markets, customer bases, and natural advantages with the adjacent area in
Massachusetts, making them an ideal comparison as they are close in geography and
agglomeration economies, however after 2006 they differ in their employer mandate for health
insurance. Because firms with 10 or less employees are exempt, weestimate the effect on these
two groups of businesses separately, providing a “third level” of differencing. This type of
analysis requires establishment data with very precise location information as well as
information on the establishment’s employment, age, and size which we attain using the Dun and
Bradstreet Marketplace (D&B) data set. We measure both shorter-term (1 year) and longer-term
(3 year) effects of the health care reform on these organizations.
In addition to providing new information on the entrepreneurship landscape in
Massachusetts, our study also allows policy makers to draw the best conclusions possibly about
the potential future effects of the Affordable Care Act. On October 30, 2013 President Obama
stated “Your law was the model for the nation’s law” when addressing Faneuil Hall in Boston,
MA. This suggests our findings will provide insight on the potential effects of ACA on
entrepreneurship in the United States. Furthermore, the results of this study are even more
valuable considering national health care reform is essentially unprecedented and policy makers
must rely on existing programs to learn about the potential impact of the ACA.
We find that mandate-based health care reform distorts incentives for new businesses
affecting their location and employment decisions. Specifically, our results suggest that
Massachusetts initially (1 year after the reform) experienced a reduction of 1.5 percent in
establishments with 11-24 employees. However, in the longer term (3 years after the reform),
5
we find an increase of 6.1 percent in new businesses with 1-10 employees, suggesting that the
law does distort decisions by incentivizing firms to hire fewer workers and open as smaller
businesses. We also find the same pattern with the change in employment: there is a decrease of
5.9 percent in the shorter run for new business employment in firm with 11-24 employees and an
increase in the longer term of employment of 8.9 percent at businesses with 0-10 employees for
new and total establishments.
Our analysis indicates little to no effect on existing businesses or “total” (all aged)
businesses (which makes sense given existing businesses comprise the majority of all
businesses), even for businesses around the cutoff, suggesting perhaps that many existing firms
already provided health care for their employees or that the additional costs from the reform
were not sufficient to dissuade existing firm from hiring employees above the cutoff or force
existing firms to relocate. Additionally, despite the adverse effect on new business formation,
the business environment overall (all ages and sizes) in Massachusetts does not seem to be
affected. Robustness checks indicate no anticipatory effects of the law change nor differences in
trends in the treatment and counterfactual areas.
The rest of the paper will be structured with the second section describing the
Massachusetts health care reform and existing literature. The third discusses data and
methodology, while the fourth section presents the results and robustness checks and is followed
by a brief conclusion.
2. Massachusetts’ Mandate-based Health Care Reform
In 2005, Massachusetts had the highest per capita health care spending of any state in the
nation, with spending 30% higher than the national average, and over 8% of their population not
6
covered by any type of health insurance. 2 As a result, in 2006, Massachusetts adopted An Act
Providing Access to Affordable, Quality, Accountable Health Care, otherwise known as, the
Massachusetts Health Care Reform Act (MHCRA). While the act introduced widespread reform
throughout the Massachusetts health care market with aims to increase their insured population,
the two biggest changes were the individual and firm mandates. The individual mandate
required all adults to either pay a financial penalty or buy health insurance, however, households
with income below 300% of the federal poverty line were eligible for subsidies to help pay for
their coverage. In addition, Medicaid was expanded to cover more low income children and
adults. The employer provision mandated all employers with at least 11 employees provide
coverage or else face a fine, while firms with 10 or less employees were exempt from the
provision or contribution to employee health insurance.
The effects of MHCRA have been studied across many different outcomes including
rates of uninsured (Kolstad and Kowalski, 2012; Long, 2008), adverse selection (Hackmann,
Kolstad, and Kowalski, 2014), health care use and health (Kolstad and Kowalski, 2012; Miller,
2012), wage compensation (Kolstad and Kowalski, 2014), and financial distress (Mazumder and
Miller, 2014). However, the focus of this paper is how the MHCRA impacted business location
decisions, including where new businesses/entrepreneurs locate, whether survival/death rates of
existing firms are affected, and employment in both new and existing businesses. The MHCRA
mandated all businesses with 11 or more employees had to either pay a maximum per employee
fine of $295 or offer a health insurance plan in which employees can buy into it with pre-tax
dollars. (They also have to contribute some of the costs of the health insurance premiums or pay
a free rider surcharge).
2
The District of Columbia had the highest per-capita spending at $8,644, while Massachusetts spending was the
highest of any state at $7,436 and the national average was $5,726. http://kff.org/other/state-indicator/healthspending-per-capita/. Authors calculation of 30% change from (7,436-5,726)/5,726.
7
The way the law is structured provides a natural experiment to compare the behavior of
firms. Our methodology will compare businesses on either side of the Massachusetts border
with business with less than 11 employees, those exempt from MHCRA mandates, and those
with 11 or more employees which had to comply with the health insurance reform. We can test
whether the MHCRA makes doing business in Massachusetts less attractive and results in
businesses choosing to locate on the other side of the border, which allows them to retain the
same labor pool and access to any natural advantages, while at the same time avoiding the
expensive cost of providing health insurance to their employees (or paying a fine). In addition to
providing new information on the entrepreneurship landscape in Massachusetts, this study also
allows us to draw the best conclusions possible about the potential future effects of the
Affordable Care Act (ACA). While there are similarities and differences between the
Massachusetts Health Reform and Affordable Care Act, on October 30, 2013 President Obama
stated “Your law was the model for the nation’s law” when addressing Faneuil Hall in Boston,
MA. Suggesting that our findings from the Massachusetts health care reform will provide
insight on the potential effects of ACA on entrepreneurship in the U.S. and is particularly helpful
given national health care reform is essentially unprecedented and as a result, we must learn as
much from existing programs to help shape our ideas of what the ACA will do for
entrepreneurship in the U.S.
While there are many similarities between the Massachusetts Health Care Reform and the
Affordable Care Act, including but not limited to the individual mandate, expansion of Medicaid,
employer rules, state-based exchanges, and subsidies available to low income families, there are
many key differences as well. The most relevant to our study is that the ACA only puts
requirements on employers with 50 or more employees, while the MHCA mandates all firms
8
with 11 or more employees pay a fee or provide health insurance to its’ employees. In addition,
the MHCA only affected one state, which allowed entrepreneurs to avoid the policy by locating
on the other side of the state border, while for the ACA companies cannot avoid the policy by
locating in an alternate part of the United States. The size of the ACA will obviously be much
larger as it affects 50 different and diverse states and the entire United States population. Other
differences include but are not limited to the income requirement to be eligible for a subsidy to
help pay for insurance, the Medicaid expansion policy, and the requirement of co-pays for
preventative care services which was allowed by Mass Care Reform but not by ACA standards.
Massachusetts will have to make several changes to their existing health insurance
program because some of the Affordable Care Act statutes either contradict or are inconsistent
with the current regulations in place in Massachusetts (for instance the population eligible to
receive a subsidy is less generous under the Massachusetts law compared to the national law).
As a result, we use third quarter 2009 as our latest data because the results using any data after
that time period would be confounded by potential business decisions in response to the ACA
implementation rather than just the MHCA.
3. Data and Empirical Methodology
3.1 Establishment Data
To separately study new and existing establishments across different employment sizes,
we need an establishment dataset that has information on the location, size and age of the
business. Our source for establishment data comes from the Dun and Bradstreet (D&B)
Marketplace database, which includes the ZIP code where the businesses reside, their
employment, years of service, some information on their sales and their two-digit standard
9
industrial code (SIC). New businesses are defined as having 1 year or less of service, while
existing establishments are defined as having 4 or more years of service.
Because the law was adopted on April 12, 2006 with the latest effective date for several
of the provisions being July 1, 2007, we use 2005 3rd quarter D&B as our pre-period data, and
2007 3rd quarter D&B data to get a sense of the immediate response to the policy and 2009 3rd
quarter data for a more longer-term effect. We stop at 2009 3rd quarter because uncertainty from
the federal mandate-based health care program likely starts to affect entrepreneurs’ decisions as
early as 2010 and we do not want to confound our results. Additionally, as a robustness check we
run the analysis before the policy in 2006 therefore uses data from 2002 to 2005 to see if there
are any pre-existing trends.
The border approach requires comparing two adjacent areas on opposite sides of the state
border. Difficulty occurs because ZIP codes are often highly irregularly shaped and in some
cases, such as large firms or schools, can be as small as a parcel of land. Although comparing
differently shaped areas is not necessarily a problem due to our methodology that differences
over time, ideally these adjacent areas would be somewhat similarly shaped particularly with
respect to their distance from the border. We use geographic information systems (GIS)
software to create 1 and 10 mile buffer zones segments along the Massachusetts border. 3 The
analysis for the 1 mile border area has the sharpest identification because we are comparing
business activity that are most similar in levels and trends given that they are a mile away
however, leaves the reader to wonder whether these results are generalizable to the rest of the
state. Therefore, we also study firms that are 10 miles on either side of the border, which
provide a better understanding of how generalizable our results are to the rest of the state.
3
Our results are robust to alternative geographical specifications, including for instance matched ZIP codes, which
are available upon request from the authors.
10
The GIS process entails creating the buffer zones on each side of the Massachusetts
border and then overlaying a 20-by-20 mile square grid to “cut” the 1 and 10 mile buffers. This
process which can be seen in Figure 1 creates border-area pairs along the Massachusetts state
border and creates pairs of “border areas” along the state line. We then assign the business
activity in ZIP codes to the border areas that they intersect. In the case where a ZIP code
intersects more than one border area on their respective side then we assign all the business
activity to the border area with the greatest degree of overlap. 4 For more information on the
creation of the border-area pairs, see Rohlin (2011) or Rohlin, Rosenthal, & Ross (2014).
3.2 Differencing Methodology at the Border
To identify the causal effect of Massachusetts’ mandate-based health care reform on
businesses we will need to overcome a number of estimation concerns including accounting for
observed and unobserved time-varying and time-invariant area characteristics, determining the
optimal counterfactual areas, and accounting for other business-related state policies that
simultaneously occurred with the health care policy.
Determinants of business location and employment decisions, such as local area
characteristics can be organized into three types: time-invariant determinants, time-varying
determinants that affect all areas the same and area-specific determinants that change over time.
To control for these determinants we utilize a difference-in-differences methodology, which has
often been done in the policy evaluation literature, in conjunction with a border approach.
Specifically, we estimate changes in/to new and existing business activity before and after the
adoption of the health care policy in Massachusetts and compare them to changes in
4
We also tried assigning a proportional amount of the business activity to each border area, meaning if a ZIP code
had 10 businesses and was 40% in one border area and 60% in another then we would assume a uniform distribution
of businesses and assign 4 businesses and 6 businesses to their respective border areas. Our findings are robust to
this approach and are available from the authors upon request.
11
counterfactual areas. This differencing methodology eliminates any time-invariant additively
separable confounding determinants but not time-varying factors.
To minimize potential bias due to time-varying area characteristics as well as to aid us in
choosing ideal counterfactual areas we employ a border approach which focuses the analysis to
areas along the Massachusetts border. Comparing adjacent areas on opposite sides of the state
border over relatively short distances (1 and 10 miles) maximizes the potential for time-varying
factors to affect both the treatment and counterfactual areas which is accounted for by the
differencing methodology. When studying business location decisions the border approach is
particularly helpful because it allows the treatment and counterfactual areas to have the same
customer and labor markets which play vital roles in the decision of where to locate.
Additionally, another business determinant that is accounted for using this approach is area
natural advantages which also have been known to affect business location decisions. The border
approach also minimizes unobserved heterogeneous area-specific factors that only affect one
side of the border-area pair by relying on the fact that the spatial correlation of area
characteristics, such as changes in the robustness of the local economy, do not change as one
moves across state lines. Lastly, if businesses were to “hop” over to the non-Mass side of the
border then our counterfactual area are in effect being positively affected by the policy. We
view this as a potential strength as it provides us with an upper bound estimate which can be
helpful for policy recommendations.
We run the difference-in-differences regression provided in equation 1 where ∆Yits is the
change (1 or 3 year) in business activity (number of new, existing, and total establishments or
employment in those establishments) in border-area, s, in industry, i, in time period t. The
parameter β1 accounts for differences between border areas in Massachusetts and non-
12
Massachusetts and controls for any time-invariant factors, while β2 is an after time-period
dummy (2007 and 2009 in shorter- and longer-term estimates, respectively) which accounts for
any differences in time periods that affected both border-areas. The parameter, β3, is the
parameter of interest and measures the effect on businesses in Massachusetts after the reform.
Finally, PairFE and IndFE indicate the regression includes border-area pair as well as 2-digit SIC
fixed effects.
∆𝑌𝑌𝑖𝑖𝑖𝑖𝑖𝑖 = 𝛽𝛽1 (𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀)𝑠𝑠 + 𝛽𝛽2 (𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴)𝑡𝑡 + 𝛽𝛽3 (𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 × 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝑟𝑟)𝑖𝑖𝑖𝑖 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑝𝑝 + 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 + 𝜀𝜀𝑖𝑖𝑖𝑖𝑖𝑖
(1)
Despite our approach there could be residual concerns over unobserved heterogeneous
Massachusetts-specific time-varying factors confounding our estimates, therefore, we utilize a
feature of the health care policy: it only applies to businesses with 11 or more businesses. By
separately measuring the effect of the health care policy on businesses with less than 10
employees, who are not directly affected by the policy and on businesses with 11 or more
employees, who are influenced by the policy, we can better account for any time-varying factors
specific to Massachusetts. 5
Additionally, separately studying businesses by employee size helps in addressing the
concern of other state policies as long as they do not disparately affect businesses at the same
size cutoff. Our research of other Massachusetts policies during this time period found only one
other substantive business-related state policy. In 2006, Massachusetts voted to increase their
minimum wage with a two year phase in period for a final new minimum wage of $8.00 with an
effective date of January 1, 2008. 6 This minimum wage policy makes it difficult to separately
identify the effect it has on entrepreneurs from the health care policy’s impact however, because
5
Businesses with 10 or less employees in Massachusetts could be influenced by the policy if they hope to hire more
employees in the future. The results later in the paper will shed some light on this.
6
In 2006 Massachusetts had a minimum wage of $6.75, while the surrounding states had minimum wages of $7.40
in Connecticut, $5.15 in New Hampshire, $6.75 in New York, $6.75 in Rhode Island, and finally $7.25 in Vermont.
13
the minimum wage affects all businesses and does not have a cutoff similar to the health care
policy by analyzing the effect on businesses around the health care cutoff we can account for the
other Massachusetts policies that occurred at that time. 7
Lastly, difference-in-differences methodology relies on the assumption that both
treatment and control areas are trending in similar ways. Although, we use the border approach
to mitigate this concern, we explicitly test for trends by running our specification before the
policy occurred, using 2002 and 2005 as our pre- and post-periods, respectively.
4. Results
4.1 Establishments
The estimates of the effect of the Massachusetts health care reform on the number of new
(Panel A), existing (Panel B), and total (all aged) establishments (Panel C) are shown in Table 1.
The table shows estimates of the law change in the shorter term (2005-2007) in the first three
columns and in the longer term (2005 -2009) in columns 4 to 6. Because the health care reform
mandate is directly affecting businesses with 11 or more employees, the analysis is separately
conducted to show the effects of the reform on businesses with 0-10 employees (exempt from the
reform), and businesses with 11 or more employees (treated by the law change). However, due
to the possibility of the reform being particularly costly to firms around the cutoff we analyze
businesses with 11-24 employees, as well as for firms with 11+ employees. Tables 1 through 9
focus the analysis on border areas that extend 1 mile into the interior while appendix tables 1
through 4 provide the corresponding results for border areas up to 10 miles into the interior. The
0 to 1 mile analysis provides the best areas in terms of identification by minimizing
7
There is evidence in the minimum wage literature that smaller businesses are particularly sensitive to minimum
wage changes (see Rohlin 2011)
14
heterogeneous area-specific changes while the 0 to 10 mile analysis provides insight into how
generalizable are the results for the rest of Massachusetts. Results are robust across border size. 8
The first three columns of Panel A in Table 1 displays the estimates for the shorter term
(2005 to 2007) effect of the law change on number of new (1 year or less years of service)
establishments, which essentially measures the birth of firms before and after the law change.
To begin we will look at the 1-10 employee businesses that are exempt from the health care
reform but may be influenced by the policy if they hope to increase their employment size above
10 employees in the future. The negative estimate (of -0.191) for the “MASS” variable indicates
that Massachusetts has less new businesses (establishment births) relative to neighboring areas
on the other side of the state border, however it is not statistically different from zero. The
statistically significant positive effect (0.191) on “AFTER” shows that the business environment
has improved in general in 2007 compared to 2005. The effect of the law change is the
interaction between being in Massachusetts and being after the reform for firms with 1 to 10
employees. The effect is relatively small (-0.024) and statistically insignificant suggesting that
small new businesses were not strongly deterred from starting their business in Massachusetts
immediately after the reform.
Moving to the second column of Panel A of Table 1 examines the effect of the health
care reform on employers (those with 11-24 employees) who must now offer health care benefits
to their employees because of the reform. We find that being in Massachusetts after the health
care reform deters new businesses from locating in that area with a decrease of 0.023 new
businesses, statistically significant at the 5% level suggesting that businesses near the cutoff
either do not locate in Massachusetts or chose to remain small by having few employees. To
8
Additionally, analysis of the 0 to 5 mile border areas produced similar results as the 0 to 1 and 0 to 10 analysis.
Although these results are not shown in the paper they are available upon request.
15
determine the extent of this deterrent effect on firms with 11 or more employees column 3 of
Panel A shows the results for all firms with 11 or more employees. We find a smaller (-0.002)
and insignificant effect for all firms with more than 11 employees, which may not be surprising
considering that large businesses will likely never be under 11 employees and highlights the
importance of separately estimating the effect of the number of businesses with 11-24
employees.
Columns 4-6 of Panel A estimate the longer term (2005 to 2009) effect of the
Massachusetts health care reform on businesses by the same size classifications (1-10, 11-24,
11+) as the shorter term classifications. We see that while all of the longer term effects are
statistically insignificant, the effect on 1-10 employees becomes positive with a large magnitude,
showing that there is an increase of 0.159 new small firms, although not statistically different
from zero. This could be evidence of new firms that were already planning to be relatively small
(say less than 20 employees) making a conscientious choice to only hire 10 or less employees to
be exempt from the employer mandate. The effect on 11-24 employee firms is still negative but
is essentially zero, while the 11+ effect is positive but essentially zero. The longer-term effect
seems to be that by 2009 new firms decide to hire less than 11 employees in response to the law
change.
Panel B examines the effects of existing businesses to measure whether the health care
reform is affecting survival or death rates of businesses in Massachusetts. Overall, the
interaction term in Panel B of Table 1 does not indicate the health care reform drove existing
businesses out of the state or caused them to shutdown relative to the counterfactual areas
regardless of the employment size. We find a positive statistically insignificant effect of 0.095
firms for 0-10 employee firms, in addition to finding almost zero estimates for 11-24 firms
16
(0.009) and 11+ firms (0.008) both of which are imprecisely estimated. The longer term findings
support the idea that existing businesses did not have disparate closure rates.
Results shown in Panel C of Table 1 combine the business activity of new and existing
establishments to investigate the reform’s impact on businesses for all businesses regardless of
their years of service. We find a larger positive effect for small business (0-10) and small
negative effect on firms with 11 to 24 employees in the short term however both are imprecisely
estimated. In the longer term there are much larger estimates compared to new and existing
establishments but again without precision. However, it is very difficult to interpret the size of
these changes in establishments due to our border approach. Therefore, as is more typical in this
literature, we move on to estimates of the percent change in the number of establishments.
Table 2 has the identical table structure as Table 1 but instead a natural log
transformation of the dependent variable has occurred making the interpretation of the
coefficients the percent change. Focusing on the difference-in-differences interaction term for
new establishments, small firm (1-10 employees) have a positive 1.2 percent estimate, however it
is not distinguishable from zero. For the businesses facing potential increased health care costs
or fines (11-24), the interaction term shows a decrease in new businesses in Massachusetts after
the law change of 1.5%, statistically significant at the 5%. For the longer term effects, there is an
additional 6% increase in small businesses, statistically significant at the 1% level, providing
evidence that entrepreneurs who plan to operate small businesses still locate in Massachusetts
however they purposefully hired less than 11 employees in response to the health care reform.
Together these results provide evidence that around the cutoff new businesses are purposefully
employing fewer workers to stay under the cutoff. There continues to be no evidence of broad
losses of new entrepreneurs for all businesses larger than 11 employees.
17
Moving to existing establishments, Panel B suggests that the new health care reform has
not caused firms 4 years or older to have higher closure or relocation rates in either time period.
If firms already offer health care benefits to their employees after they are in business for a few
years then that may explain the lack of response by businesses with 4 or more years of service.
For total establishments, results suggest that businesses were not affected by the reform one year
after adoption but were more responsive to the policy by 2009. Specifically, firms with 11 or
more employees experienced a relative 7 percent decline in the number of total firms suggesting
that the law change may have been detrimental to the businesses activity in Massachusetts.
However, as we will discuss later in the paper this detrimental effect seems to be concentrated in
the 0 to 1 mile border areas and as we move further away from the border this effect dissipates.
Also, it should be noted that the only positive coefficient for the interaction term in the total
results was in the 1 to 10 employee sized firms with a 6.63 percent, although barely statistically
insignificant. Table 2 provides evidence of two trends: first new businesses in Massachusetts
after the law change purposefully choose less than 11 employees to avoid the law change and
second total businesses with 11 or more employees choose to locate on the other side of the
border. Both cases provide evidence that the law change did deter new business activity in
Massachusetts in the 0 to 1 mile border region.
4.2 Employment
The effect of the Massachusetts health care reform on businesses in Massachusetts can
not only affect the extensive margin of whether or not a firm opens or closes but also the
intensive margin of the number of employees they hire. Table 4 estimates equation (1) using
employment as the dependent variable and it set up in a similar fashion as Table 2. Panel A
shows that there is a decrease of 0.38 employees at new firms with employees with 11 to 24
18
employees, statistically significant at the 5% level. Existing establishments continue to exhibit
little evidence of deterrent effects from the reform in either the number of firms as well as their
employment decisions. For total establishments, the coefficients on the interaction term between
Massachusetts and being after the law change for the treated firms (11-24 and 11+) show
imprecisely estimated negative effects, suggesting that the firms on the opposite side of the
border hired more employees. Again these effects are very hard to interpret the magnitude, so
we turn our analysis to the percent change in employment for firms.
Table 4 estimates the percent change in employment in all industries. Consistent with the
patterns for establishments shown in Table 2, we see that for new firms there is an almost 6%
decrease in employment at firms with 11-24 employees in Massachusetts after the law change,
statistically significant at the 5% and that in the longer-term there is an increase in employment
of 9% for small firms with less than 11 employees. These results are consistent with the results
and patterns seen for establishments shown in Table 2 where we found that there was a shorterterm loss in firms with 11-24 employees and a longer-term gain in small firms with less than 11
employees.
Similar to the firm results, we do not find many employment effects at existing
establishments. For total establishments, there is an approximately a 9% increase in employment
at small firms and a decrease in employment of 20% for firms with 11 or more employees.
Similar to the firm results, we will demonstrate that this negative effect is concentrated at the 0 to
1 mile border region. Table 4 again provides evidence that there are adverse entrepreneurial
effects from the Massachusetts health care reform.
Industry Results
19
Tables 2-5 provide results for all industries, however it is possible that some industries
are effected more than others. For instance, a priori we would expect export industries, such as
manufacturing, to respond differently than service industries which rely on a customer and
employment base. The changes in the number of establishments (Table 5) and employment
(Table 6) in the following industries: manufacturing, retail, service, and wholesale. For
parsimony, we only show the estimate for the interaction term between being in Massachusetts
and after law change. Panel A of Table 5 again shows new establishments and we find an
increase of 3.01 percent in number of firms in manufacturing with less than 11 employees, with
the effect getting slightly larger in the long-run with both having some statistical significance. It
seems the loss of new businesses with 11 to 24 employees in the shorter-term is in the service
and wholesale industries with losses of 3.79 percent and 13.6 percent respectively. The longerterm growth in firms with only 1 to 10 employees is driven by the manufacturing and service
industries with growth rates of 3.9 percent and 11 percent respectively.
The existing establishment results by industry support the findings for all industries that
existing firms were not affected by the reform with the exception of the manufacturing industry
with 1 to 10 employees in the shorter-term with an estimated loss of 4.37 percent. The total
results suggest that the service industry is particularly sensitive to the health care changes with a
7 percent loss of 11 to 24 employee firms in the shorter term. The longer term results show a
growth in small sized service firms (1 to 10) of 13.2 percent and a loss of -12.7 percent of firms
with 11 plus employees.
Table 6 shows the employment effects across industries and show firms were more
responsive in their employment decisions than their decisions to stay in business. The evidence
suggests that retail, wholesale and particularly the services changed their employment decisions
20
due to the reform. This seems reasonable given the fact that these industries are the least likely
to have provided health care benefits to their employees before the reform.
4.3 Placebo Test
A weakness of the difference-in-differences approach is the reliance on the assumption of
similar pre-trends. Although the border approach attempts to use control areas that are trending
most similarly, we can also explicitly test for this by estimating the effect of the reform before
the law was enacted. Table 7 presents the placebo effects for establishments and employment
between 2002 and 2005. The first three columns display the effect on firm location decisions
while the last three columns show the effect on their employment decisions. None of the results
are statistically significant and many are small in magnitude suggesting Massachusetts border
areas were not trending differently compared to their adjacent control areas prior to the reform.
Additionally, most of the estimates on the interaction term for 11-24 employees are actually
small and positive rather than the negative effects we measured for the actual law change.
4.4 Effects for 0-10 borders
Although the 0 to 1 mile border region offers treatment and control areas that are most
similar it leaves one wondering what about areas further away from the border. Therefore, we
present the results for 0 to 10 mile border pairs with Table A-1 and A-2 showing the change and
percent change in the number of establishments while Table A-3 and A4 showing the change and
percent change in the employment in those firms. Overall, the two tables show a consistent story
with those from Tables 1 to 4 in that we see a negative effect on new establishments among
treated firms with 11-24 employees. However, an important finding from Table A-2 is that the
negative effect on total firms in the longer term for businesses with 11 plus employees dissipates.
Instead of a statistically significant -0.0705 in the 0 to 1 border region we have an imprecisely
21
estimated -0.036 for the 0 to 10 border region. 9 This suggests that the negative effect on firm
location decision for total firms with 11 plus employees is concentrated in 0 to 1 mile border
region.
However, the employment effect on 11 plus employees is relatively supportive of the
finding that employment in 11 or more employee firms was negatively affected. Table A-4
shows that for all-aged firm results in the longer term for 11 plus employees a loss of 11.8
percent and losing its statistical significance compared to the 0 to 1 mile border results in Table 1
of 19.6 percent. However, the shorter term employment estimate in Table A-4 for 11 plus
employees for all-aged establishments is higher in the 0 to 10 mile border results, -15.7 percent
(statistically significant) than the 0 to 1 mile border estimate of -9.9 percent (not statistically
significant). Taken as a whole, the 0 to 10 mile border results support the findings new
businesses were hurt by the reform in the shorter term and that employment decisions were
negatively affected for firms with 11 or more employees while the location decisions of firm
with 11 or more employees may only be affected for near the state border.
4.5 How Does this Movement Around the Cutoff Affect the Overall Business Environment?
The results presented so far suggest that the Massachusetts health care reform increased
new establishments that were considered to be small (0-10 employees) in the longer term while
causing a shorter term decrease in the new businesses with 11-24 employees. Additionally, there
is evidence that employment in larger (11 or more employees) firms were negatively affected in
the longer term. This leads to questions about whether Massachusetts economy overall was
affected by these distortions. Therefore, Tables 8 and 9 present the results for number of firms
and employment, respectively, when all firms are pooled together in Massachusetts compared to
9
In results not shown, the 0 to 5 mile border region also indicates little to no effect on total firms with 11 plus
employees in the longer term with an imprecisely estimated -0.0354.
22
neighboring areas to determine the total effect on firms for new establishments (panel A),
existing establishments (panel B), and total establishments (panel C). By using the border
analysis, we are finding the upper bound effect because its possible businesses that would have
opened in Massachusetts will instead locate on the other side of the border, which decreases
Massachusetts and increases the other side of the border (the counterfactual). Since we don’t
find an effect, it gives more strength to the argument that the Massachusetts health care program
did not have as much of a negative impact as was initially feared. The first and third columns
gives the change in the number of establishments (matches to Table 1) in the shorter and longer
term, while the second and fourth columns estimate the percent change in establishments
(comparison to Table 2). Overall, there are no statistically significant interaction terms for all
three types of firms in Table 8. The point estimates are actually positive for new firms while
negative for existing and all aged firms. Ignoring statistical significance for a moment, the
percent change estimates for the all-aged estimates suggest that massachussets decreased 9.8
percent and 15.5 percent in the shorter and longer term which would suggest that Massachusetts
was much worse off after the policy. However, these estimates are quite imprecise and this type
of analysis suffers from bias resulting from other state policy changes. A specific policy to be
worried about would be that Massachusetts also increased their minimum wage during this time
period so the results shown in Tables 8 and 9 are including the minimum wage effect.
Nonetheless, our take away from this analysis is that there is little evidence of an effect of the
health care reform on the overall business environment.
Employment, none of the interaction terms are statistically significant. Best guess is that
the percent changes are negative for everything except for the shorter term change for new
23
establishments, showing evidence that our best guess is the negative effect for firms with 11 or
more employees outweighs the growth in employment for smaller firms.
Conclusion
To understand the full economic impact of the Massachusetts Healthcare Reform, it is important
to not only weight the benefits, such as increased insured population and increased health
outcomes, but also consider potential costs, including those on the entrepreneurship activity in
Massachusetts. The healthcare reform instituted near universal coverage by including an
individual mandate and also mandated all businesses with more than eleven employees provide
health insurance for their employees. This provides a unique quasi-experiment to investigate
whether the business mandate decreased establishments and employment in Massachusetts, as
opposing policy makers feared.
This paper measures the effect of Massachusetts healthcare reform on new, existing, and
total entrepreneurship activity by using a difference-in-differences methodology augmented by a
border approach, which allows us to control for time-invariant characteristics among other
things. We find that the law change decreased establishments and employment among firms
with 11-24 employees for which the firm mandate was binding, and increased establishments and
employment for businesses with 0-10 employees which were protected from the law change. We
find this as evidence that the healthcare reform did distort the decisions of entrepreneurs by
encouraging them to open smaller businesses with fewer employees than they likely otherwise
would have. However, when considering total employment we do not find big decreases in
establishments or employment as had once been fears.
24
This paper gives new evidence on the cost side of the Massachusetts healthcare reform to
be considered with the previous literature that measured the benefits to the population of
Massachusetts. In addition, as President Obama has repeatedly stated that the federal Affordable
Care Act was modeled after Massachusetts healthcare reform, meaning that our paper gives
insight into potential costs of the federal healthcare reform. While it will be many years until we
know the entrepreneurial costs of federal healthcare reform, in the meantime our paper provides
suggestive and helpful evidence on the potential effects of healthcare reform on business activity
in the United States.
25
References
Courtemanche, Charles and Daniela Zapata. 2014. “Does Universal Coverage Improve Health?
The Massachusetts Experience.” NBER Working Paper #17893.
Currie, Janet and Jonathan Gruber. 1996. “Health Insurance Eligibility, Utilization of Medical
care, and Child Health.” The Quarterly Journal of Economics, 111 (2):431-366.
Finkelstein, Amy. “The Aggregate Effects of Health Insurance: Evidence from the Introduction
of Medicare.” The Quarterly Journal of Economics, 122(1); 1-37.
Finkelstein, Amy, Taubman, Sarah, Wright, Bill, Bernstein, Mira, Gruber, Jonathan, Newhouse,
Joseph, Allen, Heidi, Baicker, Katherine, and the Oregon Health Study Group. 2012 “The
Oregon Health Insurance Experiment: Evidence from the First year.” The Quarterly Journal of
Economics, 127(3): 1057-1106.
Hackmann, Martin, Kolstad, Jonathan, and Amanda Kowalski. 2012. “Health Reform, Health
Insurance, and Selection: Estimating Selection into Health Insurance
Using the Massachusetts Health Reform” American Economic Review: Papers & Proceedings
May 2012. Vol. 102, No. 3: 498-501.
Kaiser foundation an update 6 years later
Kolstad, Jonathon and Amanda Kowalski. 2012. “The Impact of Health Care Reform on Hospital
and Preventive Care: Evidence from Massachusetts” Journal of Public Economics. December
Vol. 96. 909-929.
Kolstad, Jonathon and Amanda Kowalski. 2014 “Mandate-Based Health Reform and the Labor
Market: Evidence from the Massachusetts Reform” NBER Working Paper 17933. Latest
Version: January 2014.
Long, Sharon. 2008. “On the road to universal coverage: impacts of reform in Massachusetts at
one year. Health Affairs, 27(4):270->>.
Mazumder, Bhashkar and Sarah Miller. 2014. “The Effects of the Massachusetts Health Care
Reform on Financial Distress”. FRB of Chicago working paper 2014-01.
Miller, Sarah. 2012. “The Impact of the Massachusetts Health Care Reform on Health Care Use
among Children”. American Economic Review, 102(3):502-07.
Scott 2009
26
27
Figure 1: Example of the Geographic Information Systems software.
28
TABLE 1- The Change in the Number of Establishments in All Industries from Massachusetts Healthcare
Reform using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
MASS x AFTER
AFTER
MASS
Observations
Longer term (2005 to 2009)
Shorter term (2005 to 2007)
# of Employees
# of Employees
1 to 10
11 to 24
11+
1 to 10
11 to 24
11+
(1)
(2)
(3)
(4)
(5)
(6)
Panel A: New Establishments
-0.0210
-0.0234**
-0.00233
0.159
-0.00264
0.00510
(0.0681)
(0.0103)
(0.0110)
(0.149)
(0.00848)
(0.0179)
0.191***
0.0125
-0.00609
0.503***
-0.0124
-0.0249
(0.0673)
(0.00958)
(0.0108)
(0.134)
(0.00781)
(0.0175)
-0.191
0.00211
-0.00642
-0.177
0.000231
-0.00885
(0.173)
(0.0132)
(0.0225)
(0.179)
(0.0129)
(0.0219)
7,672
4,517
4,913
7,468
3,928
4,337
Panel B: Existing Establishments
MASS x AFTER
AFTER
MASS
Observations
0.0952
(0.576)
0.00982
(0.103)
0.00869
(0.166)
0.925
(1.975)
0.0480
(0.0685)
0.0598
(0.0966)
-1.158**
-0.0710
-0.0936
6.843***
0.171**
0.236**
(0.557)
-0.249
(4.877)
7,901
(0.0999)
-0.298
(0.912)
7,372
(0.157)
-0.481
(1.401)
7,372
(1.717)
-0.0173
(5.137)
7,514
(0.0641)
-0.294
(0.938)
7,208
(0.0990)
-0.480
(1.440)
7,208
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
AFTER
MASS
Observations
0.239
(0.513)
-0.0265
(0.120)
-0.0384
(0.208)
0.885
(2.012)
-0.128
(0.0979)
-0.254
(0.175)
-1.138**
-0.0430
-0.0547
7.493***
0.337***
0.539***
(0.492)
-1.216
(5.287)
7,753
(0.116)
-0.170
(0.952)
7,245
(0.199)
-0.173
(1.398)
7,404
(1.846)
-1.077
(5.411)
7,637
(0.0965)
-0.171
(0.966)
7,138
(0.178)
-0.195
(1.428)
7,287
29
TABLE 2- The Percent Change of Establishments in All Industries from Massachusetts Healthcare Reform
using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
MASS x AFTER
AFTER
MASS
Observations
Longer term (2005 to 2009)
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
0.0122
(0.0143)
-0.0150**
(0.00646)
-0.00284
(0.00675)
0.0618***
(0.0208)
-0.00347
(0.00559)
0.000403
(0.00927)
0.0494***
0.00833
-0.00261
0.100***
-0.00574
-0.0135
(0.0127)
-0.0468
(0.0442)
7672
(0.00616)
0.00287
(0.00745)
4517
(0.00635)
-0.00158
(0.0129)
4913
(0.0217)
-0.0452
(0.0441)
7468
(0.00414)
0.00157
(0.00729)
3928
(0.00878)
-0.00299
(0.0124)
4337
Panel B: Existing Establishments
MASS x AFTER
-0.0253
(0.0229)
-0.00843
(0.0166)
-0.0167
(0.0220)
0.00198
(0.0395)
0.0142
(0.0170)
0.00757
(0.0215)
AFTER
-0.0329
0.00130
0.00703
0.183***
0.0204
0.0278
(0.0222)
0.143
(0.139)
7901
(0.0158)
0.0390
(0.101)
7372
(0.0207)
0.0544
(0.120)
7372
(0.0360)
0.157
(0.141)
7514
(0.0155)
0.0346
(0.103)
7208
(0.0203)
0.0486
(0.123)
7208
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
-0.00432
(0.0194)
-0.0176
(0.0212)
-0.0313
(0.0279)
0.0663
(0.0392)
-0.0382
(0.0260)
-0.0705*
(0.0395)
AFTER
-0.0428**
0.00915
0.0208
0.129***
0.0714**
0.105**
(0.0167)
0.0649
(0.136)
7753
(0.0206)
0.0778
(0.104)
7245
(0.0272)
0.126
(0.121)
7404
(0.0407)
0.0460
(0.137)
7637
(0.0278)
0.0721
(0.106)
7138
(0.0418)
0.120
(0.124)
7287
MASS
Observations
30
TABLE 3- The Change in the Employment in All Industries from Massachusetts Healthcare Reform using
Difference-and-Difference Estimation.
Border: 0 to 1 Mile
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
Longer term (2005 to 2009)
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
MASS x AFTER
-0.0349
(0.114)
-0.376**
(0.141)
0.463
(0.412)
0.279
(0.294)
-0.0665
(0.107)
0.361
(0.707)
AFTER
0.242**
0.173
-0.638
0.826***
-0.173
-0.756
(0.101)
-0.304
(0.320)
7,672
(0.139)
0.0883
(0.168)
4,517
(0.393)
-0.347
(0.647)
4,913
(0.257)
-0.276
(0.335)
7,468
(0.108)
0.0536
(0.166)
3,928
(0.618)
-0.421
(0.631)
4,337
MASS
Observations
Panel B: Existing Establishments
MASS x AFTER
0.174
(1.445)
0.00982
(0.103)
0.0686
(4.156)
2.275
(4.221)
0.0480
(0.0685)
1.662
(2.342)
AFTER
-2.608*
-0.0710
-1.855
13.89***
0.171**
5.018*
(1.439)
-1.310
(14.30)
7,901
(0.0999)
-0.298
(0.912)
7,372
(3.824)
-13.46
(34.33)
7,372
(3.700)
-0.745
(14.91)
7,514
(0.0641)
-0.294
(0.938)
7,208
(2.476)
-13.45
(35.25)
7,208
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
AFTER
MASS
Observations
0.946
(1.399)
-0.326
(1.801)
-0.676
(5.253)
0.885
(2.012)
-1.841
(1.429)
-6.267
(4.375)
-3.181**
-0.671
-1.292
7.493***
4.694***
12.75***
(1.383)
-3.938
(15.36)
7,753
(1.778)
-2.185
(13.66)
7,245
(4.946)
-5.781
(34.33)
7,404
(1.846)
-1.077
(5.411)
7,637
(1.422)
-2.224
(13.85)
7,138
(4.482)
-6.444
(35.05)
7,287
31
TABLE 4- The Percent Change in the Employment in All Industries from Massachusetts Healthcare Reform
using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
MASS x AFTER
AFTER
MASS
Observations
Longer term (2005 to 2009)
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
0.0167
(0.0175)
-0.0589**
(0.0235)
-0.00327
(0.0290)
0.0894***
(0.0295)
-0.0183
(0.0216)
0.00127
(0.0389)
0.0526***
0.0330
-0.0188
0.119***
-0.0156
-0.0551
(0.0142)
-0.0549
(0.0563)
7672
(0.0235)
0.0178
(0.0241)
4517
(0.0260)
-0.00442
(0.0520)
4913
(0.0277)
-0.0521
(0.0562)
7468
(0.0154)
0.0123
(0.0235)
3928
(0.0357)
-0.0103
(0.0501)
4337
Panel B: Existing Establishments
MASS x AFTER
-0.0380
(0.0350)
-0.0160
(0.0444)
-0.0666
(0.0606)
-0.000978
(0.0547)
0.0458
(0.0460)
0.00102
(0.0572)
AFTER
-0.0324
0.00581
0.0343
0.186***
0.0318
0.0646
(0.0339)
0.203
(0.172)
7901
(0.0413)
0.108
(0.194)
7372
(0.0565)
0.175
(0.241)
7372
(0.0503)
0.220
(0.174)
7514
(0.0377)
0.0928
(0.199)
7208
(0.0501)
0.158
(0.247)
7208
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
-0.00227
(0.0258)
-0.0381
(0.0569)
-0.0993
(0.0758)
0.0880*
(0.0516)
-0.0835
(0.0681)
-0.196*
(0.103)
AFTER
-0.0590**
0.0251
0.0677
0.107*
0.158**
0.264**
(0.0225)
0.102
(0.166)
7753
(0.0559)
0.204
(0.203)
7245
(0.0746)
0.354
(0.252)
7404
(0.0524)
0.0735
(0.167)
7637
(0.0722)
0.186
(0.206)
7138
(0.109)
0.339
(0.257)
7287
MASS
Observations
32
TABLE 5- The Percent Change in Establishments Across Different Industries from Massachusetts
Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
Only MASS x
AFTER coefficients
are Presented
Longer term (2005 to 2009)
# of Employees
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
1 to 10
11 to 24
11+
(1)
(2)
(3)
(4)
(5)
(6)
Panel A: New Establishments
Manufacturing
Retail
Service
Wholesale
0.0301*
(0.0167)
-0.00637
(0.0113)
-0.00704
(0.00994)
0.0390**
(0.0171)
-0.00383
(0.0131)
-0.0195
(0.0143)
0.0115
-0.0497
-0.0364
0.0475
-0.0194
-0.00592
(0.0429)
(0.0291)
(0.0229)
(0.0506)
(0.0334)
(0.0336)
0.0342
-0.0379*
-0.00324
0.110*
-0.0268
0.00229
(0.0458)
-0.188
(0.158)
(0.0211)
-0.136*
(0.0748)
(0.0155)
0.0227
(0.0391)
(0.0564)
-0.0154
(0.150)
(0.0214)
0.0505
(0.0731)
(0.0146)
0.173
(0.106)
Panel B: Existing Establishments
Manufacturing
-0.0437*
(0.0236)
-0.0107
(0.0188)
-0.00774
(0.0231)
-0.0166
(0.0335)
-0.000216
(0.0200)
0.00738
(0.0251)
Retail
-0.0103
0.0128
0.0128
-0.0302
0.0270
0.0103
(0.0472)
(0.0432)
(0.0486)
(0.0578)
(0.0528)
(0.0568)
Service
-0.00194
-0.0505
-0.0558
0.0277
0.0163
0.0154
Wholesale
(0.0439)
-0.0326
(0.0857)
(0.0351)
(0.0368)
0.00493
0.0262
(0.0873)
(0.0603)
Panel C: Total Establishments
(0.0723)
-0.0570
(0.0936)
(0.0372)
-0.0179
(0.0901)
(0.0408)
-0.0900
(0.0718)
-0.0279
(0.0224)
-0.00929
(0.0223)
-0.0204
(0.0276)
0.0120
(0.0341)
-0.0265
(0.0215)
-0.0414
(0.0286)
0.0202
-0.0365
-0.0528
0.0511
-0.0764
-0.0803
(0.0512)
(0.0764)
(0.0504)
(0.0602)
Manufacturing
Retail
(0.0451)
(0.0461)
Service
0.00752
-0.0700*
-0.0653
0.132*
-0.0780
-0.127*
Wholesale
(0.0363)
0.0604
(0.0650)
(0.0373)
0.00784
(0.0660)
(0.0396)
-0.00267
(0.0568)
(0.0726)
0.128
(0.0886)
(0.0465)
-0.00953
(0.102)
(0.0658)
-0.104
(0.0902)
33
TABLE 6- The Percent Change in Employment Across Different Industries from Massachusetts
Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
Only MASS x
AFTER coefficients
are Presented
Longer term (2005 to 2009)
# of Employees
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
1 to 10
11 to 24
11+
(1)
(2)
(3)
(4)
(5)
(6)
Panel A: New Establishments
Manufacturing
0.0539**
(0.0258)
-0.0239
(0.0424)
-0.0314
(0.0520)
0.0685**
(0.0275)
-0.00915
(0.0508)
-0.119
(0.0777)
Retail
0.00184
-0.190*
-0.130
0.0960
-0.104
-0.0155
(0.0669)
(0.105)
(0.0983)
(0.0843)
(0.112)
(0.126)
0.0431
-0.210**
0.00943
0.138*
-0.201*
0.0585
(0.0545)
-0.244
(0.219)
(0.0902)
-0.474*
(0.255)
(0.0734)
0.240
(0.241)
(0.0691)
0.0713
(0.202)
(0.115)
0.177
(0.291)
(0.0586)
0.736*
(0.429)
-0.0175
(0.0489)
0.0238
(0.0598)
-0.000716
(0.0721)
Service
Wholesale
Panel B: Existing Establishments
Manufacturing
Retail
Service
Wholesale
Manufacturing
Retail
Service
Wholesale
-0.0672*
(0.0373)
-0.00813
(0.0604)
-0.0325
(0.0711)
-0.0121
-0.0103
0.00355
-0.0302
0.0163
-0.0154
(0.0598)
(0.112)
(0.136)
(0.0742)
(0.141)
(0.151)
0.0166
-0.160*
-0.143
0.0380
-0.00676
0.00101
(0.0597)
-0.0658
(0.111)
(0.0866)
(0.104)
0.141
0.0823
(0.194)
(0.155)
Panel C: Total Establishments
(0.0966)
-0.106
(0.149)
(0.0855)
-0.0704
(0.243)
(0.0976)
-0.368*
(0.199)
-0.0456
(0.0380)
-0.0170
(0.0735)
-0.0682
(0.0838)
0.0148
(0.0564)
-0.0669
(0.0712)
-0.152
(0.0968)
0.0390
-0.103
-0.139
0.0658
-0.234*
-0.211
(0.0674)
(0.128)
(0.141)
(0.0954)
(0.124)
(0.150)
0.0329
-0.210**
-0.198*
0.172*
-0.201*
-0.321**
(0.0477)
0.0442
(0.0854)
(0.0902)
0.100
(0.192)
(0.101)
-0.0133
(0.162)
(0.0891)
0.183
(0.114)
(0.115)
-0.0432
(0.265)
(0.149)
-0.389*
(0.216)
34
TABLE 7- Robustness Check: The Change in the Establishments and Employment in All Industries
Before the Massachusetts Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
MASS x AFTER
AFTER
MASS
Observations
Establishment Effects from 2002 to 2005
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
Employment Effects from 2002 to 2005
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
0.00776
(0.0172)
0.00502
(0.00441)
-0.00002
(0.00750)
0.0154
(0.0243)
0.0194
(0.0168)
-0.0145
(0.0354)
0.0232
-0.00718*
-0.00381
0.0110
-0.0299**
-0.00550
(0.0178)
-0.0478
(0.0438)
7453
(0.00383)
-0.00143
(0.00953)
4588
(0.00601)
0.000164
(0.0127)
4949
(0.0265)
-0.0612
(0.0626)
7453
(0.0142)
0.000343
(0.0345)
4588
(0.0260)
0.0162
(0.0501)
4949
Panel B: Existing Establishments
MASS x AFTER
0.0278
(0.0220)
-0.00223
(0.0156)
0.000233
(0.0194)
0.0384
(0.0334)
-0.0241
(0.0437)
0.00685
(0.0564)
AFTER
-0.0395*
-0.00404
-0.00576
-0.0703**
-0.0109
-0.0302
(0.0209)
0.127
(0.135)
7514
(0.0148)
0.0427
(0.0988)
7206
(0.0188)
0.0552
(0.115)
7206
(0.0322)
0.183
(0.167)
7514
(0.0408)
0.136
(0.190)
7206
(0.0514)
0.179
(0.223)
7206
-0.00650
(0.0378)
0.0444
(0.0660)
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
AFTER
MASS
Observations
-0.0663
(0.0534)
0.00763
(0.0140)
0.0229
(0.0232)
-0.0966
(0.0736)
0.0575
-0.0146
-0.0306
0.0675
-0.0301
-0.0772
(0.0516)
0.171
(0.149)
7534
(0.0120)
0.0766
(0.104)
7046
(0.0211)
0.114
(0.120)
7104
(0.0699)
0.254
(0.188)
7534
(0.0304)
0.224
(0.206)
7046
(0.0569)
0.340
(0.238)
7104
35
TABLE 8- The Change in Total (All Sizes) Establishments in All Industries from Massachusetts
Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
MASS x AFTER
AFTER
MASS
Observations
Shorter term
Longer term
(2005 to 2007)
(2005 to 2009)
Establishments
Establishments
Change in
Percent
Change in
Percent
Number
Change
Number
Change
(1)
(2)
(3)
(4)
Panel A: New Establishments
-0.0370
(0.122)
-0.0322
(0.0890)
Pre-term
(2002 to 2005)
Establishments
Placebo
In Levels
(5)
0.0173
(0.0346)
-0.152
(0.379)
0.0936
(0.117)
0.215**
0.0456*
1.045***
0.229**
0.0620
(0.0873)
-0.167
(0.240)
5,733
(0.0227)
-0.0361
(0.0636)
5,733
(0.302)
-0.233
(0.244)
4,889
(0.0876)
-0.0512
(0.0643)
4,889
(0.0755)
-0.304
(0.236)
5,402
Panel B: Existing Establishments
MASS x AFTER
0.112
(0.747)
-0.0132
(0.0363)
1.636
(1.814)
-0.0228
(0.0307)
-0.145
(0.360)
AFTER
-1.260*
-0.0423
6.427***
0.195***
0.173
(0.715)
-0.634
(6.044)
8,065
(0.0359)
0.157
(0.167)
8,065
(1.613)
-0.477
(6.307)
7,808
(0.0274)
0.201
(0.167)
7,808
(0.354)
-0.575
(6.089)
7,752
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
-0.269
(0.885)
-0.0454
(0.0702)
2.116
(1.944)
-0.0112
(0.0911)
0.337
(0.294)
AFTER
-0.724
0.0181
6.547***
0.193**
-0.246
(0.849)
-0.440
(6.183)
8,056
(0.0653)
0.212
(0.177)
8,056
(1.771)
-0.449
(6.360)
8,150
(0.0884)
0.238
(0.182)
8,150
(0.305)
-0.771
(6.596)
7,705
MASS
Observations
36
TABLE 9- The Change in Total (All Sizes) Employment in All Industries from Massachusetts
Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 1 Mile
MASS x AFTER
AFTER
MASS
Observations
Shorter term
Longer term
(2005 to 2007)
(2005 to 2009)
Establishments
Establishments
Change in
Percent
Change in
Percent
Number
Change
Number
Change
(1)
(2)
(3)
(4)
Panel A: New Establishments
0.431
(0.391)
0.0426
(0.0554)
0.950
(1.675)
Pre-term
(2002 to 2005)
Establishments
Placebo
In Levels
(5)
0.00192
(0.141)
-0.0214
(0.538)
-0.447
0.0115
1.072
0.241*
-0.00609
(0.309)
-0.641
(0.923)
5733
(0.0387)
-0.0526
(0.103)
5733
(0.738)
-0.729
(0.938)
4889
(0.125)
-0.0684
(0.104)
4889
(0.356)
-0.592
(1.011)
5402
Panel B: Existing Establishments
MASS x AFTER
0.855
(5.100)
-0.0138
(0.0633)
6.299
(4.711)
-0.0586
(0.0623)
-2.389
(2.650)
AFTER
-5.076
-0.0622
16.55***
0.208***
1.518
(4.767)
-12.57
(44.61)
8065
(0.0604)
0.287
(0.248)
8065
(4.339)
-12.19
(45.77)
7808
(0.0533)
0.347
(0.247)
7808
(2.774)
-11.60
(45.00)
7752
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
AFTER
MASS
Observations
-5.713
(8.514)
-0.0980
(0.127)
-0.744
(6.193)
-0.155
(0.146)
4.092
(3.496)
1.510
0.0883
24.41***
0.323**
-5.219
(8.399)
-5.065
(44.96)
8056
(0.122)
0.413
(0.260)
8056
(6.302)
-5.021
(45.44)
8150
(0.146)
0.460*
(0.268)
8150
(3.425)
-9.339
(48.30)
7705
37
APPENDIX TABLE 1- The Change in the Number of Establishments in All Industries from Massachusetts
Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 10 Mile
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
Longer term (2005 to 2009)
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
MASS x AFTER
0.0500
(0.0789)
-0.0291*
(0.0151)
-0.0200
(0.0164)
0.474
(0.318)
-0.00214
(0.0159)
0.00541
(0.0207)
AFTER
0.263***
0.0128
0.00337
0.682***
-0.0180
-0.0299
(0.0937)
0.167
(0.288)
7,580
(0.0132)
0.0241
(0.0226)
5,505
(0.0166)
0.0296
(0.0348)
5,734
(0.185)
0.251
(0.314)
7,323
(0.0140)
0.0236
(0.0221)
4,981
(0.0221)
0.0287
(0.0341)
5,347
MASS
Observations
Panel B: Existing Establishments
MASS x AFTER
-0.779
(0.560)
-0.0170
(0.0795)
-0.0720
(0.125)
6.127
(4.113)
0.217
(0.170)
0.269
(0.230)
AFTER
-1.044*
-0.0700
-0.0818
8.109***
0.220*
0.312*
(0.536)
10.79
(8.035)
7,956
(0.0763)
1.549
(1.416)
7,795
(0.116)
2.451
(2.164)
7,795
(2.730)
11.42
(8.436)
7,667
(0.123)
1.545
(1.416)
7,747
(0.180)
2.446
(2.164)
7,747
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
-0.524
(0.634)
-0.165
(0.135)
-0.297
(0.220)
3.982
(4.606)
0.168
(0.150)
-0.0305
(0.324)
AFTER
-0.986
0.0642
0.127
11.39***
0.253*
0.591*
(0.597)
11.64
(8.791)
7,649
(0.133)
1.567
(1.464)
7,791
(0.209)
2.482
(2.235)
7,775
(3.215)
12.79
(9.173)
7,436
(0.135)
1.607
(1.454)
7,790
(0.325)
2.566
(2.206)
7,898
MASS
Observations
38
APPENDIX TABLE 2- The Percent Change in the Number of Establishments in All Industries from
Massachusetts Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 10 Mile
MASS x AFTER
AFTER
MASS
Observations
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
Longer term (2005 to 2009)
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
0.0197
(0.0162)
-0.0179**
(0.00784)
-0.0132
(0.00819)
0.0447
(0.0358)
-0.00106
(0.00787)
0.000667
(0.0108)
0.0527***
0.00863
0.00257
0.125***
-0.00910
-0.0166
(0.0134)
0.0598
(0.0677)
7580
(0.00756)
0.0153
(0.0106)
5505
(0.00764)
0.0166
(0.0155)
5734
(0.0245)
0.0660
(0.0696)
7323
(0.00695)
0.0153
(0.0105)
4981
(0.0109)
0.0163
(0.0153)
5347
Panel B: Existing Establishments
MASS x AFTER
-0.0357*
(0.0204)
-0.00543
(0.0172)
-0.0155
(0.0199)
0.0165
(0.0414)
0.0262
(0.0214)
0.0147
(0.0249)
AFTER
-0.0278
-0.00561
-0.00272
0.170***
0.0138
0.0188
(0.0199)
0.413*
(0.218)
7956
(0.0158)
0.237*
(0.135)
7795
(0.0193)
0.298*
(0.163)
7795
(0.0379)
0.421*
(0.222)
7667
(0.0183)
0.230*
(0.135)
7747
(0.0230)
0.290*
(0.162)
7747
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
0.0124
(0.0455)
-0.0365
(0.0297)
-0.0553
(0.0369)
-0.0892
(0.0691)
0.0164
(0.0257)
-0.0360
(0.0531)
AFTER
-0.0661
0.0234
0.0357
0.284***
0.0216
0.0678
(0.0439)
0.418*
(0.229)
7649
(0.0300)
0.236
(0.139)
7791
(0.0378)
0.300*
(0.168)
7775
(0.0655)
0.434*
(0.231)
7436
(0.0244)
0.239*
(0.137)
7790
(0.0532)
0.308*
(0.165)
7898
MASS
Observations
39
APPENDIX TABLE 3- The Change in the Number of Employment in All Industries from Massachusetts
Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 10 Mile
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
Longer term (2005 to 2009)
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
MASS x AFTER
0.0519
(0.122)
-0.417**
(0.195)
-0.333
(0.492)
0.809
(0.523)
-0.0949
(0.211)
0.149
(0.652)
AFTER
0.320**
0.171
-0.227
1.069***
-0.210
-0.744
(0.136)
0.441
(0.583)
7580
(0.167)
0.388
(0.307)
5505
(0.426)
0.815
(1.002)
5734
(0.338)
0.584
(0.630)
7323
(0.187)
0.384
(0.302)
4981
(0.612)
0.828
(0.990)
5347
MASS
Observations
Panel B: Existing Establishments
MASS x AFTER
-1.967
(1.438)
-0.240
(1.175)
-3.059
(3.323)
13.19
(8.976)
3.027
(2.387)
5.358
(5.307)
AFTER
-2.237
-1.118
-1.181
16.72***
2.874*
7.122
(1.448)
31.50
(23.61)
7956
(1.159)
22.54
(20.36)
7795
(2.945)
60.98
(52.89)
7795
(6.050)
33.13
(24.55)
7667
(1.664)
22.48
(20.36)
7747
(4.397)
60.97
(52.86)
7747
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
-1.284
(1.755)
-2.344
(1.972)
-8.507
(5.596)
7.831
(10.05)
2.232
(2.127)
-1.821
(7.816)
AFTER
-2.548
0.777
3.748
23.92***
3.431*
13.78*
(1.687)
33.85
(25.63)
7649
(1.985)
22.91
(21.05)
7791
(5.130)
62.04
(54.67)
7775
(7.262)
36.58
(26.42)
7436
(1.915)
23.42
(20.91)
7790
(7.897)
64.10
(53.94)
7898
MASS
Observations
40
APPENDIX TABLE 4- The Percent Change in the Number of Employment in All Industries from
Massachusetts Healthcare Reform using Difference-and-Difference Estimation.
Border: 0 to 10 Mile
MASS x AFTER
AFTER
MASS
Observations
Shorter term (2005 to 2007)
# of Employees
1 to 10
11 to 24
11+
(1)
(2)
(3)
Panel A: New Establishments
Longer term (2005 to 2009)
# of Employees
1 to 10
11 to 24
11+
(4)
(5)
(6)
0.0245
(0.0193)
-0.0672**
(0.0263)
-0.0536
(0.0323)
0.0595
(0.0442)
-0.00869
(0.0282)
-0.00760
(0.0444)
0.0539***
0.0324
0.00461
0.144***
-0.0267
-0.0667
(0.0148)
0.0914
(0.0903)
7580
(0.0258)
0.0614*
(0.0329)
5505
(0.0251)
0.0711
(0.0571)
5734
(0.0311)
0.0984
(0.0925)
7323
(0.0218)
0.0621*
(0.0329)
4981
(0.0405)
0.0705
(0.0561)
5347
Panel B: Existing Establishments
MASS x AFTER
-0.0470
(0.0322)
-0.0218
(0.0436)
-0.0691
(0.0543)
-0.000355
(0.0515)
0.0616
(0.0593)
0.0125
(0.0668)
AFTER
-0.0323
-0.0135
0.00582
0.180***
0.00775
0.0211
(0.0302)
0.550*
(0.273)
7946
(0.0407)
0.509*
(0.266)
7795
(0.0534)
0.679*
(0.343)
7795
(0.0480)
0.560*
(0.277)
7667
(0.0490)
0.490*
(0.265)
7747
(0.0605)
0.655*
(0.340)
7747
MASS
Observations
Panel C: Total (All Aged Firm) Establishments
MASS x AFTER
0.0194
(0.0625)
-0.0866
(0.0709)
-0.157*
(0.0894)
-0.127
(0.0885)
0.0326
(0.0650)
-0.118
(0.124)
AFTER
-0.0921
0.0465
0.0918
0.314***
0.0318
0.150
(0.0605)
0.549*
(0.285)
7649
(0.0714)
0.509*
(0.277)
7791
(0.0925)
0.691*
(0.353)
7775
(0.0862)
0.571*
(0.287)
7436
(0.0597)
0.511*
(0.273)
7790
(0.125)
0.700*
(0.348)
7898
MASS
Observations
41