Effects of self-employment on hospitalizations: instrumental variables analysis of social security data

The importance of self-employment and small businesses raises questions about their health effects and public policy implications, which can only be addressed with suitable data. We explore the relationship between self-employment and health by drawing on comprehensive longitudinal administrative data to explore variation in individual work status and by applying novel instrumental variables. We focus on an objective outcome-hospital admissions-that is not subject to recall or other biases that may affect previous studies. Our main findings, based on a sample of about 6,500 individuals followed monthly from 2005 to 2011 and who switch between self-employment and wage work along that period, suggest that self-employment has a positive effect on health as it reduces the likelihood of hospital admission by at least half.