Ella Mattinen

We estimate entrepreneurs' preferences for social insurance (SI) coverage and the extent of adverse selection and moral hazard in social insurance for entrepreneurs in Finland. Our results show that, when given a choice over SI contributions, owners prefer contributions and coverage levels that are on average 16% lower than the standard mandate. To identify adverse selection and moral hazard responses, we use positive correlation tests and a reform that allowed a subset of entrepreneurs to freely choose their SI contributions and coverage. We find that both moral hazard and adverse selection responses are limited.

Inheritance and gift taxes may induce liquidity-constrained family-owned businesses to discontinue their firms, as meeting tax liabilities may significantly exacerbate their performance. Thus, preferential tax treatment for intra-family transfers is often considered an appealing policy option. This paper studies the impact of preferential tax treatment on firm successions using a 2004 Finnish reform that significantly reduced gift and inheritance taxes for business transfers within the family. We construct a repeated cross-section of firms from 1999 to 2010 and classify them as dynastic or non-dynastic based on the presence of the owner’s child on the board prior to succession. We compare trends before and after the tax reform to assess whether it influenced firms' decisions to sell, retain ownership within the family, or liquidate. We also examine whether firms engage in precautionary behavior prior to succession as well as key indicators of firm performance. Our estimates show that the likelihood of family succession rises immediately following the reform, with clear signs of anticipatory behavior. However, we detect no significant effects on behavioral or financial outcomes for firms. By linking firm succession dynamics to tax policy, our findings provide new evidence on how inheritance taxation shapes ownership continuity and financial behavior in family firms.