Does Self-Employment Reduce Unemployment?

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

Papers on Entrepreneurship, Growth and Public Policy from Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group

Abstract: This paper investigates the dynamic interrelationship between self-employment and unemployment rates. On the one hand, unemployment rates may stimulate start-up activity of self-employed. On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods. These two effects have resulted in considerable ambiguities about the interrelationship between unemployment and entrepreneurial activity. This paper introduces a two-equation vector autoregression model capable of reconciling these ambiguities and tests it for data of 23 OECD countries over the period 1974-2002. The empirical results confirm the two distinct relationships between unemploy-ment and self-employment, i.e. "refugee" and "entrepreneurial" effects. We also find that the "entrepreneu-rial" effects are considerably stronger than the "refugee" effects.

Keywords: entrepreneurship; Gibrat's Law; self-employment; unemployment (search for similar items in EconPapers)
JEL-codes: L11 M13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent and nep-lab
Date: 2006-05
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ftp://papers.mpiew-jena.mpg.de/egp/discussionpapers/2005-07.pdf (application/pdf)

Related works:
Working Paper: Does Self-Employment Reduce Unemployment? (2007)
Working Paper: Does Self-Employment Reduce Unemployment? (2005)
Working Paper: Does Self-Employment reduce Unemployment? (2007)
Working Paper: Does Self-Employment Reduce Unemployment? (2005)
Journal Article: Does self-employment reduce unemployment? (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:esi:egpdis:2005-07

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