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Does Self-Employment Measure Entrepreneurship? Evidence from Great Britain

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  • Giulia Faggio
  • Olmo Silva

Abstract

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.

Suggested Citation

  • Giulia Faggio & Olmo Silva, 2012. "Does Self-Employment Measure Entrepreneurship? Evidence from Great Britain," SERC Discussion Papers 0109, Spatial Economics Research Centre, LSE.
  • Handle: RePEc:cep:sercdp:0109
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    References listed on IDEAS

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    1. Martinez-Granado, Maite, 2002. "Self-Employment and Labour Market Transitions: A Multiple State Model," CEPR Discussion Papers 3661, C.E.P.R. Discussion Papers.
    2. Marco Cagetti & Mariacristina De Nardi, 2004. "Taxation, entrepreneurship, and wealth," Staff Report 340, Federal Reserve Bank of Minneapolis.
    3. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994. "Entrepreneurial Decisions and Liquidity Constraints," RAND Journal of Economics, The RAND Corporation, pages 334-347.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
    10. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
    11. 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.
    12. Robert Carroll & Douglas Holtz-Eakin & Mark Rider & Harvey Rosen, 1996. "Income Taxes and Entrepreneur' Use of Labor," Working Papers 752, Princeton University, Department of Economics, Industrial Relations Section..
    13. Gibbons, Stephen & Overman, Henry G. & Pelkonen, Panu, 2010. "Wage disparities in Britain: people or place?," LSE Research Online Documents on Economics 30845, London School of Economics and Political Science, LSE Library.
    14. 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.
    15. 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.
    16. Silva, Olmo, 2007. "The Jack-of-All-Trades entrepreneur: Innate talent or acquired skill?," Economics Letters, Elsevier, vol. 97(2), pages 118-123, November.
    17. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    18. 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.
    19. 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.
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    Citations

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    Cited by:

    1. Faggio, Giulia & Silva, Olmo, 2014. "Self-employment and entrepreneurship in urban and rural labour markets," Journal of Urban Economics, Elsevier, vol. 84(C), pages 67-85.
    2. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
    3. repec:krk:eberjl:v:5:y:2017:i:2:p:177-193 is not listed on IDEAS
    4. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Spatial Economics Research Centre, LSE.
    5. repec:krk:eberjl:v:5:y:2017:i:2:p:159-176 is not listed on IDEAS
    6. Katharina Pijnenburg, 2013. "Self-Employment and Economic Performance: A Geographically Weighted Regression Approach for European Regions," Discussion Papers of DIW Berlin 1272, DIW Berlin, German Institute for Economic Research.
    7. Daly, Moira, 2015. "The long term returns of attempting self-employment with regular employment as a fall back option," Labour Economics, Elsevier, vol. 35(C), pages 26-52.

    More about this item

    Keywords

    Entrepreneurship; self-employment; spatial distribution;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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