Entrepreneurial Moral Hazard in Income Insurance: Empirical Evidence from a Large Administrative Sample
Publikation: Working paper › Forskning
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Entrepreneurial Moral Hazard in Income Insurance : Empirical Evidence from a Large Administrative Sample. / Ejrnæs, Mette; Hochguertel, Stefan.
Centre for Applied Microeconometrics. Department of Economics, University of Copenhagen, 2008.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Entrepreneurial Moral Hazard in Income Insurance
T2 - Empirical Evidence from a Large Administrative Sample
AU - Ejrnæs, Mette
AU - Hochguertel, Stefan
N1 - JEL classification: C33, D12, D14, D91, J23, J26
PY - 2008
Y1 - 2008
N2 - We study risk behavior of Danish self-employed entrepreneurs, whose income risk may be driven by both exogenous factors and effort choice (moral hazard). Partial insurance is available through voluntary unemployment insurance (UI). Additional incentives to sign insurance contracts stem from a UI-embedded, government-subsidized early retirement (ER) program, giving benefits that are unrelated to business risk. Indeed, we argue that the self-employeds' incentives to insure themselves stem from the ER plan rather than from the UI cover. We show how to use a policy reform to identify moral hazard in observed transitions to unemployment when insurance is a choice variable. We use administrative (register) panel data covering 10% of the Danish population. We find that the insured are indeed more likely to transit into unemployment than the uninsured, once we properly instrument for the insurance choice.
AB - We study risk behavior of Danish self-employed entrepreneurs, whose income risk may be driven by both exogenous factors and effort choice (moral hazard). Partial insurance is available through voluntary unemployment insurance (UI). Additional incentives to sign insurance contracts stem from a UI-embedded, government-subsidized early retirement (ER) program, giving benefits that are unrelated to business risk. Indeed, we argue that the self-employeds' incentives to insure themselves stem from the ER plan rather than from the UI cover. We show how to use a policy reform to identify moral hazard in observed transitions to unemployment when insurance is a choice variable. We use administrative (register) panel data covering 10% of the Danish population. We find that the insured are indeed more likely to transit into unemployment than the uninsured, once we properly instrument for the insurance choice.
KW - Faculty of Social Sciences
KW - entrepreneurs
KW - self-employment
KW - early retirement
KW - unemployment insurance
KW - Denmark
KW - panel data
M3 - Working paper
BT - Entrepreneurial Moral Hazard in Income Insurance
PB - Centre for Applied Microeconometrics. Department of Economics, University of Copenhagen
ER -
ID: 5240907