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Does self-employment reduce unemployment?

  • Thurik, A. Roy
  • Carree, Martin A.
  • van Stel, André
  • Audretsch, David B.

This paper investigates the dynamic interrelationship between self-employment and unemployment rates. On the one hand, unemployment rates may stimulate start-up activity of self-employed. On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods. These two effects have resulted in considerable ambiguities about the interrelationship between unemployment and entrepreneurial activity. This paper introduces a two-equation vector autoregression model capable of reconciling these ambiguities and tests it for data of 23 OECD countries over the period 1974-2002. The empirical results confirm the two distinct relationships between unemploy-ment and self-employment, i.e. "refugee" and "entrepreneurial" effects. We also find that the "entrepreneu-rial" effects are considerably stronger than the "refugee" effects.

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Article provided by Elsevier in its journal Journal of Business Venturing.

Volume (Year): 23 (2008)
Issue (Month): 6 (November)
Pages: 673-686

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Handle: RePEc:eee:jbvent:v:23:y:2008:i:6:p:673-686
Contact details of provider: Web page: http://www.elsevier.com/locate/jbusvent

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