Does self-employment reduce unemployment
This paper investigates the dynamic interrelationship between self-employment and unemployment rates. On the one hand, unemployment rates may stimulate start-up activity of self-employed. On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods. These two effects have resulted in considerable ambiguities about the interrelationship between unemployment and entrepreneurial activity. This paper introduces a two equation vector autoregression model capable of reconciling these ambiguities and tests it for data of 23 OECD countries over the period 1974-2002. The empirical results confirm the two distinct relationships between unemployment and self-employment, i.e. ‘refugee’ and ‘entrepreneurial’ effects. We also find that the ‘entrepreneurial’ effects are considerably stronger than the ‘refugee’ effects.
|Keywords||Gibrat's Law, employment, entrepreneurship, industrial orginization|
|Publisher||Centre for Economic Policy Research, London|
Audretsch, D.B., Carree, M.A., van Stel, A.J., & Thurik, A.R.. (2005). Does self-employment reduce unemployment. Centre for Economic Policy Research. Discussion Papers. Centre for Economic Policy Research, London. Retrieved from http://hdl.handle.net/1765/9822