Self-employment of the young and the old: exploring effects of the crisis in Croatia

The economic and financial crisis that erupted in Europe in 2008 hit some groups of the population harder than others. Young population was among those that experienced the largest increase in unemployment, whereas many of those belonging to the older working-age group, after experiencing a loss of their jobs, were unable to return to employment. Hence, one of the options for both of these groups was to seek self-employment solutions. This paper focuses precisely on transitions into self-employment of these two end-groups among the working-age population in a country that experienced one of the longest and largest setbacks during the recent recession – Croatia. The main goal of the paper is to establish differences in transition to self-employment of the young and the old before and during the crisis by distinguishing between two types of transitions: (i) out of unemployment or “necessity self-employment” and (ii) out of employment or “opportunity self-employment”. The data source used for the analysis is EU LFS. Main results suggest that necessity self-employment is dominant for both groups, and especially so for the old, whereas opportunity self-employment is slightly more pronounced in the case of the young population. However, both necessity and opportunity self-employment have decreased in the crisis period. Decomposition analyses – Fairlie and Blinder-Oaxaca – indicate that the gap between the old and the young has increased in the case of necessity self-employment while it decreased for opportunity self-employment between the two observed periods. Further examination of the characteristics of unemployed youth that became self-employed or employed during the crisis reveals that the only common characteristics that increase both the probability of self-employment as well as the probability of employment are the share of working adults and the share of children within a household.