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

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  • 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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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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