The relationship between business ownership and unemployment in Spain: a matter of quantity or quality?

This paper examines the interrelations between self-employment and unemployment rates for Spain in the period 1972-2004, comparing them with the general pattern observed for OECD countries. We apply the model as proposed by Audretsch, Carree, van Stel and Thurik (2005) to Spain. The divergence between predicted and actual unemployment levels in Spain are explained by country-specifi c shocks in the period under study, which are outside the scope of the model. This indicates that the general mechanism of employment generation by the self-employed may also be applicable to Spain, at least in the long run. The Spanish industrial structure is characterized by a relatively high and fl uctuating unemployment level and a relatively high and stable business ownership rate, suggesting that the quantity of business ownership in Spain does not have a particularly large contribution to bringing down unemployment. In recent years we see that the unemployment rate decreases and stabilizes. We argue that, in addition to several labor market reforms, an increase in the quality of business ownership in Spain may also have contributed to the recent decrease in the unemployment rate. Keywords: entrepreneurship, self-employment, unemployment, economic growth, Spain