Public health insurance, individual health, and entry into self-employment

We investigate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into selfemployment. Health insurance systems that distinguish between the two sectors of employment create incentives or disincentives to start...

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Bibliographic Details
Published in:Small business economics 2017-10, Vol.49 (3), p.647-669
Main Authors: Fossen, Frank M., König, Johannes
Format: Article
Language:English
Subjects:
Business and Management
Discrete time
Disincentives
Economic models
Employment
Entrepreneurs
Entrepreneurship
Group health insurance
Health information
Health insurance
Incentives
Industrial Organization
Insurance industry
Management
Microeconomics
Panel data
Public health
Self employment
Workers
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Summary:We investigate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into selfemployment. Health insurance systems that distinguish between the two sectors of employment create incentives or disincentives to start a business for different individuals. We estimate a discrete time hazard rate model of entry into self-employment based on representative household panel data for Germany, which include individual health information. The results indicate that an increase in the health insurance cost differential between self-employed workers and paid employees by ϵ10 per month decreases the probability of entry into self-employment by 1.7% of the annual entry rate. This shows that entrepreneurship lock, which an emerging literature describes for the system of employer-provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health-care reforms.
ISSN:0921-898X
1573-0913
DOI:10.1007/s11187-017-9843-0