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Rising Self-employment in the Midst of High Unemployment: An Empirical Analysis of Recent Developments in Canada

Author

Listed:
  • Lin, Zhengxi
  • Picot, Garnett
  • Yates, Janice

Abstract

This paper highlights recent developments in self-employment in Canada and explores its relationship to unemployment/full-time paid-employment. There are now two and a half million Canadians working at their own businesses, amounting to 16.2% of the total labour force or accounting for 17.8% of total employment. In the first eight years of the 1990s, self-employment on average expanded by 4.1% per year, contributing to over three out of four new jobs the economy has created. Entry and exit data demonstrate that there are substantial flows into and out of this sector of the economy. Gross flows into and out of self-employment as the main labour market activity averaged nearly half a million per year between 1982 and 1994, amounting to 42% of the total self-employed population. The fixed-effects modelling results show a statistically significant but empirically small negative (positive) relationship between self-employment and unemployment (full-time paid- employment). This conclusion holds true across different data sources, for different time periods, for different measures and definitions, for different empirical samples, and across various estimating techniques. There is also a statistically significant but empirically small negative (positive) relationship between exits out of self-employment and unemployment (full-time paid- employment). It appears that a host of non-cyclical factors are behind the recent surge in self-employment.

Suggested Citation

  • Lin, Zhengxi & Picot, Garnett & Yates, Janice, 1999. "Rising Self-employment in the Midst of High Unemployment: An Empirical Analysis of Recent Developments in Canada," Analytical Studies Branch Research Paper Series 1999133e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:1999133e
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    File URL: http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=11F0019M1999133&ObjType=46&lang=en&limit=0
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    References listed on IDEAS

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    1. Irwin Bernhardt, 1994. "Comparative Advantage in Self-Employment and Paid Work," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 273-289, May.
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    4. 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.
    5. 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.
    6. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-294, April.
    7. Roy, R. & Gauthier, J., 1997. "Diverging Trends in Self-Employment in Canada," Papers r-97-13, Gouvernement du Canada - Human Resources Development.
    8. 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.
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    10. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-266, May.
    11. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 485-506.
    12. Schuetze, Herb J., 2000. "Taxes, economic conditions and recent trends in male self-employment: a Canada-US comparison," Labour Economics, Elsevier, vol. 7(5), pages 507-544, September.
    13. Acs, Zoltán J & Audretsch, David B & Evans, David S, 1994. "Why Does the Self-Employment Rate Vary Across Countries and Over Time?," CEPR Discussion Papers 871, C.E.P.R. Discussion Papers.
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    Citations

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    Cited by:

    1. Carol Moore & Richard Mueller, 2002. "The transition from paid to self-employment in Canada: the importance of push factors," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 791-801.
    2. Garnett Picot & Andrew Heisz, 2000. "The Performance of the 1990s Canadian Labour Market," Canadian Public Policy, University of Toronto Press, vol. 26(s1), pages 7-25, July.
    3. Nadja Kamhi & Danny Leung, 2005. "Recent Developments in Self-Employment in Canada," Staff Working Papers 05-8, Bank of Canada.
    4. Heisz, Andrew & Nakamura, A. & Picot, Garnett, 2001. "Job Tenure, Worker Mobility and the Youth Labour Market During the 1990s," Analytical Studies Branch Research Paper Series 2001155e, Statistics Canada, Analytical Studies Branch.
    5. Patrick, George & Alexander, Corinne E., 2004. "Sources of and Responses to Risk: Have Crop Producers' Opinions Changed?," Purdue Agricultural Economics Report (PAER) 188875, Purdue University, Department of Agricultural Economics.
    6. Baldwin, John R. & Chowhan, James, 2003. "The Impact of Self-employment on Labour-productivity Growth: A Canada and United States Comparison," Economic Analysis (EA) Research Paper Series 2003016e, Statistics Canada, Analytical Studies Branch.
    7. Finnie, Ross & Laporte, Christine & Rivard, Maud-Catherine, 2002. "Setting up Shop: Self-employment Amongst Canadian College and University Graduates," Analytical Studies Branch Research Paper Series 2002183e, Statistics Canada, Analytical Studies Branch.

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