Self-employment in the EU: quality work, precarious work or both?

This paper estimates the differences in earnings between self-employed and employees in the EU using the European Union Statistics on Income and Living Conditions data and quantile regression methods. It finds that in both Eastern and Western Europe, self-employment pays more than regular employment only for workers at the top of the earnings distribution and considerably less than regular employment for those below the median. These differences are smaller in Eastern Europe, reflecting lower protection of regular employees. This pattern is not driven by low-skilled workers, and it can be observed in both high-skilled and low-skilled occupations. Results are robust to accounting for differences in taxation, hours worked and individual unobserved characteristics. The evidence provided points to the lack of protective rights for the self-employed and low earnings at the beginning of the self-employment spells as the main explanations for lower earnings for the majority of self-employed.