Does Mandating Social Insurance Affect Entrepreneurial Activity?

Youssef Benzarti, Jarkko Harju and Tuomas Matikka

No 25651, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper estimates the effect of relaxing the social insurance mandate on entrepreneurial activity. We use a unique discontinuity in Finland that allows certain entrepreneurs not to pay social insurance contributions on their income. Using rich administrative data, we find that relaxing the social insurance mandate leads entrepreneurs to significantly reduce their contributions, which they channel instead into their firms. While young firms use this windfall to increase business activity, older ones use it to improve their net lending position by purchasing stocks. Our results imply that the social insurance mandate is binding and its efficiency cost is heterogeneous.

JEL-codes: H25 H32 H55 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-ent, nep-hea, nep-ias and nep-pbe
Note: PE
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Citations: View citations in EconPapers (4)

Published as Youssef Benzarti & Jarkko Harju & Tuomas Matikka, 2020. "Does Mandating Social Insurance Affect Entrepreneurial Activity?," American Economic Review: Insights, vol 2(2), pages 255-268.

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Journal Article: Does Mandating Social Insurance Affect Entrepreneurial Activity? (2020)
Working Paper: Does Mandating Social Insurance Affect Entrepreneurial Activity? (2019)
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