Does social insurance stimulate business creation? Evidence from China

This study investigates the causal effects of social health insurance on business creation. Since 2007, China has launched a health insurance program for urban residents without formal employment, i.e., the Urban Resident Basic Medical Insurance (URBMI). By exploiting the natural experiment, we conduct a staggered difference-in-differences to show that URBMI significantly enhances new firm creation. Results are robust after addressing endogeneity and using alternative dataset. The above effect is particularly pronounced in regions with high level of intellectual property protection, financial development, human capital, and social trust. Finally, risk taking is a plausible mechanism through which health insurance affects entrepreneurship.

Automated summary

This study examines the causal effects of social health insurance on business creation. China's Urban Resident Basic Medical Insurance (URBMI) program, launched in 2007 for urban residents without formal employment, is used as a natural experiment. The research findings show that URBMI significantly promotes new firm establishment, especially in regions with strong intellectual property protection, financial development, human capital, and social trust. The study suggests that risk taking is a plausible mechanism through which health insurance affects entrepreneurship.