Does Self-Employment Reduce Unemployment?

André van Stel, Roy Thurik, David Audretsch () and Martin Carree

No H200709, Scales Research Reports from EIM Business and Policy Research

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. This is an updated version of SCALES-paper N200504. An updated version of this paper has been published in the Journal of Business Venturing in 2008 (Volume 23, Issue 6, pp. 673-686).

Pages: 30 pages
Date: 2007-10-12
New Economics Papers: this item is included in nep-ent and nep-lab
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Does self-employment reduce unemployment? (2008)
Working Paper: Does Self-Employment reduce Unemployment? (2007)
Working Paper: Does Self-Employment Reduce Unemployment? (2006)
Working Paper: Does Self-Employment Reduce Unemployment? (2005)
Working Paper: Does Self-Employment Reduce Unemployment? (2005)
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