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Self-employment and labour market transitions: a multiple state model

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  • Martínez-Granado, Maite

Abstract

In this paper we estimate a multiple state transition model for the UK describing transitions in and out three possible labour market states: self-employment, paid employment and unemployment. This enables us to assess the effect of demographic characteristics as well as time changing economics conditions on the probabilities of exiting and entering each different state. A reduced form model is estimated allowing for unobservable individual heterogeneity. The results are consistent with the hypothesis of a deterioration of the labour market conditions generating an increase in the self-employment rates in adverse economic conditions. However unemployment duration generates a loss on human capital that reduce the probabilities of switching to self-employment. It appears also that -family background and education play and important role in determining the transition probabilities. Medium level educated individuals are the most likely to become self-employed.

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Paper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/4159.

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Handle: RePEc:ner:carlos:info:hdl:10016/4159

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Keywords: Self-employment; Duration; Heterogeneity; Economic conditions;

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References

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Citations

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Cited by:
  1. Dario Sciulli, 2006. "Making the Italian Labor Market More Flexible: An Evaluation of the Treu Reform," Economics Working Papers we063408, Universidad Carlos III, Departamento de Economía.
  2. Torrini, Roberto, 2005. "Cross-country differences in self-employment rates: the role of institutions," Labour Economics, Elsevier, vol. 12(5), pages 661-683, October.
  3. Mette Ejrnæs & Stefan Hochguertel, 2008. "Entrepreneurial Moral Hazard in Income Insurance: Empirical Evidence from a Large Administrative Sample," CAM Working Papers 2008-02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  4. Pedro Albarrán & Raquel Carrasco & Maite Martínez-Granado, 2007. "Inequality for Wage Earners and Self-Employed: Evidence from Panel Data," Banco de España Working Papers 0734, Banco de España.
  5. Andersson Joona, Pernilla & Wadensjö, Eskil, 2008. "A Gender Perspective on Self-Employment Entry and Performance as Self-Employed," IZA Discussion Papers 3581, Institute for the Study of Labor (IZA).
  6. Giulia Faggio & Olmo Silva, 2012. "Does Self-Employment Measure Entrepreneurship? Evidence from Great Britain," SERC Discussion Papers 0109, Spatial Economics Research Centre, LSE.
  7. Claudio Michelacci & Olmo Silva, 2005. "Why So Many Local Entrepreneurs?," Working Papers wp2005_0506, CEMFI.
  8. Thomas Leoni & Martin Falk, 2010. "Gender and field of study as determinants of self-employment," Small Business Economics, Springer, vol. 34(2), pages 167-185, February.
  9. Glocker, Daniela & Steiner, Viktor, 2007. "Self-Employment: A Way to End Unemployment? Empirical Evidence from German Pseudo-Panel Data," IZA Discussion Papers 2561, Institute for the Study of Labor (IZA).
  10. Andersson Joona, Pernilla & Wadensjö, Eskil, 2006. "Employees Who Become Self-Employed: Do Labour Income and Wages Have an Impact?," IZA Discussion Papers 1971, Institute for the Study of Labor (IZA).
  11. Hannu Tervo, 2006. "Regional unemployment, self-employment and family background," Applied Economics, Taylor and Francis Journals, vol. 38(9), pages 1055-1062.
  12. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
  13. Mette Ejrnaes & Stefan Hochguertel, 2008. "Entrepreneurial Moral Hazard in Income Insurance," Tinbergen Institute Discussion Papers 08-065/3, Tinbergen Institute, revised 12 Aug 2011.
  14. Mare, David C., 2006. "Constructing consistent work-life histories: a guide for users of the British Household Panel Survey," ISER Working Paper Series 2006-39, Institute for Social and Economic Research.

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