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Does Self-Employment Measure Entrepreneurship? Evidence from Great Britain

Listed author(s):
  • Giulia Faggio
  • Olmo Silva

Research on entrepreneurship often uses information on self-employment to proxy for business creation and innovative behaviour. However, little evidence has been collected on the link between these measures. In this paper, we use data from the UK Labour Force Survey (LFS) combined with data from the Business Structure Database (BSD), and the Community Innovation Survey (CIS) to study the relation between self-employment, business creation and innovation. In order to do so, we aggregate individual and firm-level data at the Travel-to-Work Area (TTWA) and investigate how the incidence of self-employment correlates with the density of business start-ups and innovative firms. Our results show that in urban areas a higher incidence of self-employment positively and strongly correlates with more business creation and innovation, but this is not true for rural areas. Further analysis suggests that this urban/rural divide is related to lack of employment opportunities in rural areas, which might push some workers into self-employment as a last resort option.

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File URL: http://www.spatialeconomics.ac.uk/textonly/SERC/publications/download/sercdp0109.pdf
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Paper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0109.

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Date of creation: May 2012
Handle: RePEc:cep:sercdp:0109
Contact details of provider: Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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  1. Robert Carroll & Douglas Holtz-Eakin & Mark Rider & Harvey S. Rosen, 2000. "Income Taxes and Entrepreneurs' Use of Labor," NBER Working Papers 6578, National Bureau of Economic Research, Inc.
  2. Claudio Michelacci & Olmo Silva, 2007. "Why So Many Local Entrepreneurs?," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 615-633, November.
  3. Silva, Olmo, 2006. "The Jack-of-All-Trades Entrepreneur: Innate Talent or Acquired Skill?," IZA Discussion Papers 2264, Institute for the Study of Labor (IZA).
  4. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Entrepreneurial Decisions and Liquidity Constraints," NBER Working Papers 4526, National Bureau of Economic Research, Inc.
  5. Marianne Bertrand & Antoinette Schoar, 2006. "The Role of Family in Family Firms," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 73-96, Spring.
  6. Carroll, Robert, et al, 2000. "Income Taxes and Entrepreneurs' Use of Labor," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 324-351, April.
  7. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
  8. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  9. Silvia Ardagna & Annamaria Lusardi, 2010. "Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints," NBER Chapters, in: International Differences in Entrepreneurship, pages 17-62 National Bureau of Economic Research, Inc.
  10. Kanbur, S M, 1979. "Of Risk Taking and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 769-797, August.
  11. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
  12. Marco Cagetti & Mariacristina De Nardi, 2006. "Taxation, entrepreneurship, and wealth," Working Paper Series WP-06-07, Federal Reserve Bank of Chicago.
  13. Martinez-Granado, Maite, 2002. "Self-Employment and Labour Market Transitions: A Multiple State Model," CEPR Discussion Papers 3661, C.E.P.R. Discussion Papers.
  14. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
  15. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
  16. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-535, June.
  17. Stephen Gibbons & Henry G. Overman & Panu Pelkonen, 2010. "Wage disparities in Britain: people or place?," LSE Research Online Documents on Economics 30845, London School of Economics and Political Science, LSE Library.
  18. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
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