The Self-Employment Option in Rigid Labor Markets: An Empirical Investigation

Joaquin Garcia-Cabo and Rocio Madera
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Joaquin Garcia-Cabo: https://www.federalreserve.gov/econres/joaquin-garcia-cabo.htm

No 1264, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper studies selection into and returns to self-employment in labor markets with stringent employment protection. Using Spanish administrative panel data, we characterize self-employment dynamics in the presence of rigidities that affect workers? outside options. We document the negative selection into self-employment when workers enter from unemployment, and the pro-cyclicality of the decision. We identify career heterogeneity in the data and estimate a rich life-cycle income process. The self-employed face shocks with smaller variances but lower returns compared to fixed-term workers?the prevalent contract out of unemployment. These facts call for a revision of active labor market policies in place.

Keywords: Self-employment; Business cycles; Unemployment; Employment protection (search for similar items in EconPapers)
JEL-codes: E32 J24 J64 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2019-11-14
New Economics Papers: this item is included in nep-lma and nep-mac
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1264

DOI: 10.17016/IFDP.2019.1264

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