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Does Self-Employment reduce Unemployment?

Author

Listed:
  • A. Roy Thurik

    (Erasmus University Rotterdam; EIM Business and Policy Research, Zoetermeer; and Max Planck Institute of Economics Rotterdam, PO Box 1738, 3000 DR Rotterdam, Netherlands)

  • Martin A. Carree

    (University of Maastricht)

  • Andre van Stel

    (EIM Business and Policy Research; Cranfield School of Management; and Max Planck Institute of Economics)

  • David B. Audretsch

    (Max Planck Institute of Economics; and Indiana University, USA)

Abstract

This paper investigates the dynamic relationship between self-employment and unemployment rates. On the one hand, high unemployment rates may lead to start-up activity of self-employed individuals (the "refugee" effect). On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods (the "entrepreneurial" effect). This paper introduces a new two-equation vector autoregression model capable of reconciling these ambiguities and estimates it for data from 23 OECD countries between 1974 and 2002. The empirical results confirm the existence of two distinct relationships between unemployment and self-employment: the "refugee" and "entrepreneurial" effects. We also find that the "entrepreneurial" effects are considerably stronger than the "refugee" effects.

Suggested Citation

  • A. Roy Thurik & Martin A. Carree & Andre van Stel & David B. Audretsch, 2007. "Does Self-Employment reduce Unemployment?," Jena Economics Research Papers 2007-089, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2007-089
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    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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