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Self-employment in Spain: Transition and earnings differential

Gema Álvarez, Carlos Gradín () and Mª Soledad Otero Giráldez

No 907, Working Papers from Universidade de Vigo, Departamento de Economía Aplicada

Abstract: In this paper we analyze the factors that influence transitions into self-employment in Spain using a discrete time duration model, and, given the evidence of lower earnings among self-employees, we further explain the earnings differential between employees and self-employees using a Oaxaca-Blinder approach. The analysis is based on the European Community Household Panel (ECPH) for 1994-2001. According to our results, the factors explaining the transition into self-employment differ according to previous status in the labor market. In general, young males have a higher probability of entering selfemployment; but while for those previously out of the labor market the probability increases with higher education, the opposite is true for employees, and this may be due to the characteristics of their jobs. Additionally, we show that the observed earnings differential between self- and paid employees is a consequence of the selectivity bias into each labor status.

Keywords: Self-employment; longitudinal data; duration model; earnings differential. (search for similar items in EconPapers)
JEL-codes: J82 J16 L26 (search for similar items in EconPapers)
Date: 2009-09
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