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Self-employment and the Okun's law

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  • Porras-Arena, M. Sylvina
  • Martín-Román, Ángel L.

Abstract

This research establishes a significant relationship between the share of self-employment in total employment and the Okun's coefficient, which had been insufficiently addressed in the literature. We provide evidence on the determinants driving the differences in the unemployment–output relationship in Spanish regions and conclude that the differences in the share of self-employment in total employment prove relevant when accounting for differences in Okun's law, and its effect is greater than that of labour productivity per worker, which had been considered the main factor for regional discrepancies. The economic policy implications of this outcome are valuable for two reasons: European authorities are promoting self-employment and the emergence of the ‘gig economy’. This finding also opens a notable line of research: assessing whether this empirical regularity is observable in other economies.

Suggested Citation

  • Porras-Arena, M. Sylvina & Martín-Román, Ángel L., 2019. "Self-employment and the Okun's law," Economic Modelling, Elsevier, vol. 77(C), pages 253-265.
  • Handle: RePEc:eee:ecmode:v:77:y:2019:i:c:p:253-265
    DOI: 10.1016/j.econmod.2018.09.006
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    Cited by:

    1. Martín-Román, Ángel L., 2020. "Beyond the added-worker and the discouraged-worker effects: the entitled-worker effect," MPRA Paper 103973, University Library of Munich, Germany.
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    4. Ignacio Moral-Arce & Javier Martín-Román & Ángel L. Martín-Román, 2019. "Cessation of Activity Benefit for Spanish Self-employed Workers: A Heterogeneous Impact Evaluation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 231(4), pages 41-79, December.

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    More about this item

    Keywords

    Okun's law; Self-employment; Unemployment; Business cycle; Spanish regions;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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