Advertisement

Small Business Economics

, Volume 49, Issue 3, pp 647–669 | Cite as

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

  • Frank M. FossenEmail author
  • Johannes König
Article

Abstract

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 self-employment. 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 €10 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.

Keywords

Health insurance Health Entrepreneurship lock Self-employment 

JEL Classification

L26 I13 J2 

Notes

Acknowledgements

We thank Joern Block, Zuzana Brixiova, Laszlo Goerke, Todd Sorensen, Viktor Steiner, two anonymous reviewers, the editor, and participants of the 2015 Annual Congress of the International Institute of Public Finance in Dublin, the 2015 Annual Meeting of the German Economic Association in Münster, the 2015 IZA/Kauffman Foundation Workshop on Entrepreneurship Research in Washington, DC, the 2015 Annual Interdisciplinary Conference on Entrepreneurship and Innovation of the G-Forum in Kassel, and participants of seminars at Freie Universität Berlin, the University of Nevada, Reno, the University of Siegen, and the Institute for Labour Law and Industrial Relations in the EU in Trier for valuable comments. Frank Fossen conducted part of this project as a visiting researcher at the University of California, Santa Cruz. He thanks the Fritz Thyssen Foundation for financial support of this research visit. The usual disclaimer applies.

Supplementary material

11187_2017_9843_MOESM1_ESM.pdf (152 kb)
ESM 1 (PDF 151 kb).

References

  1. Acs, Z. J., & Audretsch, D. B. (2005). Entrepreneurship, innovation and technological change. Foundations and Trends in Entrepreneurship, 1(4), 1–65. doi: 10.1561/0300000004.CrossRefGoogle Scholar
  2. Ahn, T. (2010). Attitudes toward risk and self-employment of young workers. Labour Economics, 17, 434–442. doi: 10.1016/j.labeco.2009.06.005.CrossRefGoogle Scholar
  3. Benitez-Silva, H., & Ni, H. (2008). Health status and health dynamics in an empirical model of expected longevity. Journal of Health Economics, 27, 564–584. doi: 10.1016/j.jhealeco.2007.09.008.CrossRefGoogle Scholar
  4. Besley, T., Hall, J., & Preston, I. (1998). Private and public health insurance in the UK. European Economic Review, 42, 491–497. doi: 10.1016/S0014-2921(98)00004-X.CrossRefGoogle Scholar
  5. Besley, T., Hall, J., & Preston, I. (1999). The demand for private health insurance: do waiting lists matter? Journal of Public Economics, 72(2), 155–181. doi: 10.1016/S0047-2727(98)00108-X.CrossRefGoogle Scholar
  6. Blanchflower, D. G. (2000). Self-employment in OECD countries. Labour Economics, 7, 471–505. doi: 10.1016/s0927-5371(00)00011-7.CrossRefGoogle Scholar
  7. Caliendo, M., Fossen, F. M., & Kritikos, A. S. (2009). Risk attitudes of nascent entrepreneurs–new evidence from an experimentally-validated survey. Small Business Economics, 32(2), 153–167. doi: 10.1007/s11187-007-9078-6.CrossRefGoogle Scholar
  8. Caliendo, M., Fossen, F. M., & Kritikos, A. S. (2010). The impact of risk attitudes on entrepreneurial survival. Journal of Economic Behavior and Organization, 76, 45–63. doi: 10.1016/j.jebo.2010.02.012.
  9. Carree, M. A., & Thurik, A. R. (2003). The impact of entrepreneurship on economic growth. In Z. J. Acs & D. B. Audretsch (Eds.), Handbook of entrepreneurship research (pp. 437–471). Boston, MA: Kluwer Academic Publishers. doi: 10.1007/0-387-24519-7_17.Google Scholar
  10. Chetty, R., Looney, A., & Kroft, K. (2009). Salience and taxation: theory and evidence. American Economic Review, 99(4), 1145–1177. doi: 10.3386/w13330.CrossRefGoogle Scholar
  11. Dunn, T., & Holtz-Eakin, D. (2000). Financial capital, human capital, and the transition to self-employment: evidence from intergenerational links. Journal of Labor Economics, 18, 282–305. doi: 10.3386/w5622.CrossRefGoogle Scholar
  12. Fairlie, R.W., & F.M. Fossen (2016). The two components of business creation: opportunity versus necessity entrepreneurship. Working paper, www.aeaweb.org/conference/2017/preliminary/paper/Na5bafNb (accessed: 12/25/16).
  13. Fairlie, R. W., Kapur, K., & Gates, S. (2011). Is employer-based health insurance a barrier to entrepreneurship? Journal of Health Economics, 30(1), 146–162. doi: 10.1016/j.jhealeco.2010.09.003.
  14. Federal Ministry of Health (2013). Daten des Gesundheitswesens 2013. [Data on Health Care 2013.] www.bundesgesundheitsministerium.de/fileadmin/Dateien/Publikationen/ Gesundheit/Broschueren/Daten_des_Gesundheitswesens_2013.pdf (accessed: 12/25/16).
  15. Fossen, F. M. (2009). Would a flat-rate tax stimulate entrepreneurship in Germany? A behavioural microsimulation analysis allowing for risk. Fiscal Studies, 30(2), 179–218. doi: 10.1111/j.1475-5890.2009.00093.x.CrossRefGoogle Scholar
  16. Fossen, F. M., & Büttner, T. J. M. (2013). The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees. Economics of Education Review, 37, 66–84. doi: 10.1016/j.econedurev.2013.08.005.
  17. García-Gómez, P., Jones, A. M., & Rice, N. (2010). Health effects on labour market exits and entries. Labour Economics, 17, 62–76. doi: 10.1016/j.labeco.2009.04.004.CrossRefGoogle Scholar
  18. Georgellis, Y., & Wall, H. J. (2005). Gender differences in self-employment. International Review of Applied Economics, 19, 321–342. doi: 10.1080/02692170500119854.CrossRefGoogle Scholar
  19. Gerlinger, T., & Schmucker, R. (2009). A long farewell to the Bismarck system: incremental change in the German health insurance system. German Policy Studies, 5(1), 3–20.Google Scholar
  20. Gilleskie, D. B., & Lutz, B. F. (2002). The impact of employer-provided health insurance on dynamic employment transitions. Journal of Human Resources, 37(1), 129–162. doi: 10.3386/w7307.CrossRefGoogle Scholar
  21. Gress, S., Walendzik, A., & Wasem, J. (2005). Nichtversicherte Personen im Krankenversicherungssystem der Bundesrepublik Deutschland: Bestandsaufnahme und Lösungsmöglichkeiten. In Discussion paper of the Faculty of Business Administration and Economics 147. Duisburg-Essen: University of.Google Scholar
  22. Gruber, J. (2000). Health insurance and the labor market. In A. J. Culyer & J. P. Newhouse (Eds.), Handbook of health economics, volume 1a (pp. 646–706). New York, NY: North-Holland. doi: 10.3386/w6762.Google Scholar
  23. Gruber, J., & Poterba, J. (1994). Tax incentives and the decision to purchase health insurance: evidence from the self-employed. Quarterly Journal of Economics, 109(3), 701–733. doi: 10.3386/w4435.CrossRefGoogle Scholar
  24. Grunow, M., & Nuscheler, R. (2014). Public and private health insurance in Germany: the ignored risk selection problem. Health Economics, 23(6), 670–687. doi: 10.1002/hec.2942.CrossRefGoogle Scholar
  25. Gumus, G., & Regan, T. L. (2013). Tax incentives as a solution to the uninsured: evidence from the self-employed. Inquiry–The Journal of Health Care Organization, Provision, and Financing, 50(4), 275–295.CrossRefGoogle Scholar
  26. Gumus, G., & Regan, T. L. (2015). Self-employment and the role of health insurance in the U.S. Journal of Business Venturing, 30(3), 357–374. doi: 10.1016/j.jbusvent.2014.01.001.CrossRefGoogle Scholar
  27. Gurley-Calvez, T. (2011). Will tax-based health insurance reforms help the self-employed stay in business? Contemporary Economic Policy, 29(3), 441–460. doi: 10.1111/j.1465-7287.2010.00202.x.CrossRefGoogle Scholar
  28. Haan, P., & Myck, M. (2009). Dynamics of health and labor market risks. Journal of Health Economics, 28, 1116–1125. doi: 10.1016/j.jhealeco.2009.09.001.CrossRefGoogle Scholar
  29. Heim, B. T., & Lurie, I. Z. (2009). Do increased premium subsidies affect how much health insurance is purchased? Evidence from the self-employed. Journal of Health Economics, 28(6), 1197–1210. doi: 10.1016/j.jhealeco.2009.07.002.CrossRefGoogle Scholar
  30. Heim, B. T., & Lurie, I. Z. (2010). The effect of self-employed health insurance subsidies on self-employment. Journal of Public Economics, 94, 995–1007. doi: 10.1016/j.jpubeco.2010.08.007.CrossRefGoogle Scholar
  31. Heim, B. T., & Lurie, I. Z. (2014). Does health reform affect self-employment? Evidence from Massachusetts. Small Business Economics, 43, 917–930. doi: 10.1007/s11187-014-9572-6.CrossRefGoogle Scholar
  32. Holtz-Eakin, D., Penrod, J. R., & Rosen, H. S. (1996). Health insurance and the supply of entrepreneurs. Journal of Public Economics, 62(1), 209–235. doi: 10.3386/w4880.CrossRefGoogle Scholar
  33. Jackson, S. (2010). Mulling over Massachusetts: health insurance mandates and entrepreneurs. Entrepreneurship Theory and Practice, 34(5), 909–931. doi: 10.1111/j.1540-6520.2009.00351.x.CrossRefGoogle Scholar
  34. Jenkins, S. P. (1995). Easy estimation methods for discrete-time duration models. Oxford Bulletin of Economics and Statistics, 57, 129–138. doi: 10.1111/j.1468-0084.1995.tb00031.x.CrossRefGoogle Scholar
  35. Jones, M. K., & Latreille, P. L. (2011). Disability and self-employment: evidence for the UK. Applied Economics, 43(27), 4161–4178. doi: 10.1080/00036846.2010.489816.CrossRefGoogle Scholar
  36. Kalwij, A., & Vermeulen, F. (2008). Health and labour force participation of older people in Europe: what do objective health indicators add to the analysis? Health Economics, 17(5), 619–638. doi: 10.1002/hec.1285.CrossRefGoogle Scholar
  37. Lewin-Epstein, N., & Yuchtman-Yaar, E. (1991). Health risks of self-employment. Work and Occupations, 18(3), 291–312. doi: 10.1177/0730888491018003003.CrossRefGoogle Scholar
  38. Lombard, K. V. (2001). Female self-employment and demand for flexible, nonstandard work schedules. Economic Inquiry, 39(2), 214–237. doi: 10.1093/ei/39.2.214.CrossRefGoogle Scholar
  39. Madrian, B. C. (1994). Employment-based health insurance and job mobility: is there evidence of job-lock? Quarterly Journal of Economics, 109(1), 27–54. doi: 10.3386/w4476.CrossRefGoogle Scholar
  40. McFadden, D. L. (1974). Conditional logit analysis of qualitative choice behavior. In P. Zarembka (Ed.), Frontiers in econometrics (pp. 105–142). New York City, NY: Academic Press.Google Scholar
  41. Ooghe, E., Schokkaert, E., & Flechet, J. (2003). The incidence of social security contributions: an empirical analysis. Empirica, 30, 81–106. doi: 10.1023/A:1024121432047.CrossRefGoogle Scholar
  42. Parker, S. C. (2009). The economics of entrepreneurship. Cambridge: Cambridge University Press. doi: 10.1017/cbo9780511817441.CrossRefGoogle Scholar
  43. Parker, S. C., & Rougier, J. C. (2007). The retirement behaviour of the self-employed in Britain. Applied Economics, 39(6), 697–713. doi: 10.1080/00036840500447807.CrossRefGoogle Scholar
  44. Perry, C. W., & Rosen, H. S. (2004). The self-employed are less likely than wage earners to have health insurance than wage-earners. So what? In D. Holtz-Eakin & H. S. Rosen (Eds.), Public policy and the economics of entrepreneurship, 23–58. Cambridge, MA: MIT Press. doi: 10.3386/w8316.Google Scholar
  45. Rietveld, C. A., Van Kippersluis, H., & Thurik, A. R. (2015). Self-employment and health: barriers or benefits? Health Economics, 24(10), 1302–1313. doi: 10.1002/hec.3087.CrossRefGoogle Scholar
  46. Schmitz, H., & Ziebarth, N. R. (2016). Does price framing affect the consumer price sensitivity of health plan choice? Forthcoming in: Journal of Human Resources. doi: 10.3368/jhr.52.1.0814-6540R1.Google Scholar
  47. Selden, T. M. (2009). The impact of increased tax subsidies on the insurance coverage of self-employed families: evidence from the 1996–2004 medical expenditure panel survey. Journal of Human Resources, 44(1), 115–139. doi: 10.1353/jhr.2009.0028.CrossRefGoogle Scholar
  48. Skriabikova, O. J., Dohmen, T., & Kriechel, B. (2014). New evidence on the relationship between risk attitudes and self-employment. Labour Economics, 30, 176–184. doi: 10.1016/j.labeco.2014.04.003.CrossRefGoogle Scholar
  49. Steiner, V., Wrohlich, K., Haan, P., & Geyer, J. (2012). Documentation of the tax-benefit microsimulation model STSM, version 2012. DIW data documentation 63. German: Institute for Economic Research.Google Scholar
  50. Sueyoshi, G. T. (1995). A class of binary response models for grouped duration data. Journal of Applied Econometrics, 10, 411–431. doi: 10.1002/jae.3950100406.CrossRefGoogle Scholar
  51. Van de Ven, W. P., & Van Praag, B. M. S. (1981). The demand for deductibles in private health insurance: a probit model with sample selection. Journal of Econometrics, 17, 229–252. doi: 10.1016/0304-4076(83)90112-4.CrossRefGoogle Scholar
  52. Van Praag, C. M., & Versloot, P. H. (2007). What is the value of entrepreneurship? A review of recent research. Small Business Economics, 29(4), 351–382. doi: 10.1007/s11187-007-9074-x.CrossRefGoogle Scholar
  53. Velamuri, M. (2012). Taxes, health insurance, and women’s self-employment. Contemporary Economic Policy, 30(2), 162–177. doi: 10.1111/j.1465-7287.2011.00256.x.CrossRefGoogle Scholar
  54. Verheul, I., Wennekers, S., Audretsch, D., & Thurik, R. (2002). An eclectic theory of entrepreneurship: policies, institutions and culture. In D. Audretsch, R. Thurik, I. Verheul, & S. Wennekers (Eds.), Entrepreneurship: determinants and policy in a European-US comparison (pp. 11–81). New York, NY: Springer Science + Business Media. doi: 10.1007/0-306-47556-1_2.CrossRefGoogle Scholar
  55. Wagner, G. G., Frick, J. R., & Schupp, J. (2007). The German Socio-Economic Panel Study (SOEP). Scope, evolution and enhancements. Journal of Applied Social Science Studies, 127(1), 139–170.Google Scholar
  56. Wellington, A. J. (2001). Health insurance coverage and entrepreneurship. Contemporary Economic Policy, 19(4), 465–478. doi: 10.1093/cep/19.4.465.CrossRefGoogle Scholar
  57. Zissimopoulos, J. M., & Karoly, L. (2007). Transitions to self-employment at older ages: the role of wealth, health, health insurance and other factors. Labour Economics, 14, 269–295. doi: 10.1016/j.labeco.2005.08.002.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Nevada, RenoRenoUSA
  2. 2.DIWBerlinGermany
  3. 3.IZABonnGermany
  4. 4.School of Business and EconomicsFreie Universität BerlinBerlinGermany

Personalised recommendations