This paper has been republished as #2019-008
Health insurance can have important effects on self-employment and self- employment transitions. However, there is a literature gap on the relationship between health insurance and self-employment in low and middle income countries, especially in the context of the rapid expansion of health insurance in these countries. This paper examines this relationship in Vietnam with a focus on the comparison between the voluntary scheme for the informal sector (mostly self-employed workers) and the compulsory insurance for the formal sector (mostly wage workers). We employ a Multinomial Logit Model on a panel from the Vietnamese Household Living Standards Surveys 2010-2014 to investigate the association between health insurance and self-employment entry and exit over time. We show that those with compulsory health insurance in Vietnam, the formal workers, do not have the incentive to start a business compared to those having voluntary insurance. This effect holds true over time in 2012 and 2014. The effect is partly explained by the better enforcement of the compulsory health insurance scheme in Vietnam, making staying out of self-employment (often informal self-employment) a preferred choice. Regarding the effect of health insurance on self- employment exit, we do not find any conclusive evidence on this matter. The rigidity of the economy is highlighted, suggesting important policy implications in the areas of health and labour policies in Vietnam.
JEL Classification: I13, J22
Keywords: health insurance, self-employment, Vietnam self-employment entry, self-employment exit