Does Mandating Social Insurance Affect Entrepreneurial Activity? / Youssef Benzarti, Jarkko Harju, Tuomas Matikka.

Format:

Book

Author/Creator:

Benzarti, Youssef.

Contributor:

National Bureau of Economic Research.

Harju, Jarkko.

Matikka, Tuomas.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25651.

NBER working paper series no. w25651

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

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.

Notes:

Print version record

March 2019.