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Does Self-Employment Measure Entrepreneurship? Evidence from Great Britain

  • 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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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
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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. Philippe Bracke & Christian Hilber & Olmo Silva, 2014. "Homeownership and Entrepreneurship: The Role of Mortgage Debt and Commitment," CESifo Working Paper Series 5048, CESifo Group Munich.
  2. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  3. 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.
  4. 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.
  5. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
  6. 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.
  7. Martinez-Granado, Maite, 2002. "Self-Employment and Labour Market Transitions: A Multiple State Model," CEPR Discussion Papers 3661, C.E.P.R. Discussion Papers.
  8. 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.
  9. Blanchflower, D.G. & Oswald, A., 1991. "What Makes an Entrepreneur?," Economics Series Working Papers 99125, University of Oxford, Department of Economics.
  10. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and entrepreneurship," LSE Research Online Documents on Economics 58436, London School of Economics and Political Science, LSE Library.
  11. 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 719-48, August.
  12. 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.
  13. Douglas Holtz-Eakin & David Joulfaian & Harvey Rosen, 1992. "Entrepreneurial Decisions and Liquidity Constraints," Working Papers 679, Princeton University, Department of Economics, Industrial Relations Section..
  14. Marco Cagetti & Mariacristina De Nardi, 2004. "Taxation, entrepreneurship and wealth," Working Papers 632, Federal Reserve Bank of Minneapolis.
  15. Silva, Olmo, 2007. "The Jack-of-All-Trades entrepreneur: Innate talent or acquired skill?," Economics Letters, Elsevier, vol. 97(2), pages 118-123, November.
  16. 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 808-27, August.
  17. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  18. 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 769-97, August.
  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 324-51, April.
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