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Does Mandating Social Insurance Affect Entrepreneurial Activity?†

Does Mandating Social Insurance Affect Entrepreneurial Activity?† AbstractThis paper estimates the effect of relaxing the social insurance mandate on entrepreneurial activity using rich administrative data from Finland. We find that relaxing the social insurance mandate leads entrepreneurs to reduce their contributions by 16 percent, which they channel instead into their firms. While young firms use the saved cash to increase their sales by 11 percent and labor costs by 6 percent, older firms use it to improve their net lending position by purchasing stocks. Our results imply that the impact of the social insurance mandate on business activity is heterogeneous and depends on the age of the firm. (JEL H55, J32, L26) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review: Insights American Economic Association

Does Mandating Social Insurance Affect Entrepreneurial Activity?†

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Publisher
American Economic Association
Copyright
Copyright © 2020 © American Economic Association
ISSN
2640-205X
eISSN
2640-2068
DOI
10.1257/aeri.20190097
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper estimates the effect of relaxing the social insurance mandate on entrepreneurial activity using rich administrative data from Finland. We find that relaxing the social insurance mandate leads entrepreneurs to reduce their contributions by 16 percent, which they channel instead into their firms. While young firms use the saved cash to increase their sales by 11 percent and labor costs by 6 percent, older firms use it to improve their net lending position by purchasing stocks. Our results imply that the impact of the social insurance mandate on business activity is heterogeneous and depends on the age of the firm. (JEL H55, J32, L26)

Journal

American Economic Review: InsightsAmerican Economic Association

Published: Jun 1, 2020

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