Public health insurance, individual health, and entry into self-employment
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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.
KeywordsHealth insurance Health Entrepreneurship lock Self-employment
JEL ClassificationL26 I13 J2
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.
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