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Displacement and self-employment entry

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  • von Greiff, Jenny

Abstract

Displacement is expected to decrease the reservation wage of self-employment by decreasing earnings in paid employment and increasing the probability of unemployment. This paper examines whether displacement increases the probability of self-employment using propensity score matching on Swedish register-based data. The data include all individuals displaced due to plant closures in 1987 and 1988, and a random sample of 200,000 employed individuals. The results suggest that displacement almost doubles the probability of entering self-employment the year after displacement. A sub-sample analysis indicates that individuals with a potentially worse position on the labor market react more strongly to displacement in terms of entering self-employment.

Suggested Citation

  • von Greiff, Jenny, 2009. "Displacement and self-employment entry," Labour Economics, Elsevier, vol. 16(5), pages 556-565, October.
  • Handle: RePEc:eee:labeco:v:16:y:2009:i:5:p:556-565
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