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Job Creation and the Self-employed Firm Size: evidence from Spain

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Author Info

  • Emilio Congregado

    (Universidad de Huelva)

  • Vicente Esteve

    (Universidad de Valencia and Universidad de La Laguna)

  • Antonio A. Golpe

    (Universidad de Huelva)

Abstract

Over the last decade, Spain created more jobs than any other country in Europe; however, now it is destroying them at an equal pace. Nevertheless, the relationship between the level of employment and the level of self-employment has remained relatively stable. In this context, there is a considerable policy interest in the way in which the self-employed firm in Spain creates and destroys employment, i.e., in the role of the self-employed as creators of additional job opportunities. This paper provides evidence of the existence of a long-term relationship between the self-employed firm that hires external labor and employees hired by third parties in Spain, while accounting for the existence of an abrupt shift in the size of self-employed firms during the previous crisis (1991 to 1993). These findings are qualified testing whether this relationship is time-dependent. Our results suggest that the null hypothesis of linear cointegration would be rejected in favor of a two-regime threshold cointegration model, that is, in favor of a time-sensitive relationship with two opposite regimes. These two regimes differ in the way that the two components of the self-employed firm size respond to restore equilibrium. In this paper, alternative rationales for explaining these findings are also discussed.

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File URL: ftp://147.156.210.157/RePEc/pdf/eec_1202.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1202.

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Length: 26 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:eec:wpaper:1202

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Keywords: Self-employed firm size; Entrepreneurship; Job Creation; Cointegration; Self-employment; Structural Break; Threshold cointegration;

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References

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  1. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, 1999. "What Determines Firm Size?," NBER Working Papers 7208, National Bureau of Economic Research, Inc.
  2. Rui Baptista & Roy Thurik, 2004. "The Relationship between Entrepreneurship and Unemployment: is Portugal an Outlier?," Papers on Entrepreneurship, Growth and Public Policy 2004-40, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
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  12. Pfeiffer, Friedhelm & Reize, Frank, 1998. "Business Start-ups by the Unemployed - an Econometric Analysis Based on Firm Data," ZEW Discussion Papers 98-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  14. Marc Cowling & Mark Taylor & Peter Mitchell, 2004. "Job Creators," Manchester School, University of Manchester, vol. 72(5), pages 601-617, 09.
  15. Fabiano Schivardi & Roberto Torrini, 2004. "Firm size distribution and employment protection legislation in Italy," Temi di discussione (Economic working papers) 504, Bank of Italy, Economic Research and International Relations Area.
  16. PERRON, Pierre & RODRIGUEZ, Gabriel, 1998. "GLS Detrending, Efficient Unit Root Tests and Structural Change," Cahiers de recherche 9809, Universite de Montreal, Departement de sciences economiques.
  17. Shin, Yongcheol, 1994. "A Residual-Based Test of the Null of Cointegration Against the Alternative of No Cointegration," Econometric Theory, Cambridge University Press, vol. 10(01), pages 91-115, March.
  18. Congregado, Emilio & Golpe, Antonio A. & Carmona, Mónica, 2010. "Is it a good policy to promote self-employment for job creation? Evidence from Spain," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 828-842, November.
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