Self-Employment and Labour Market Transitions: A Multiple State Model

Maite Martinez-Granado ()

No 3661, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use the British Household Panel Survey (BHPS) to estimate a multiple state transition model with three possible labour market states: self-employment, employment, and unemployment. This enables us to assess the effects of changes in demographic characteristics and economic conditions on the probabilities of exiting and entering these states. We allow for unobservable individual heterogeneity, duration dependence, lagged duration dependence and state dependence. Three main results are obtained. First, the aggregated unemployment rate is found to have a positive effect on the probability of becoming self-employed (push effect). Second, unemployed individuals are found to be more likely to become self-employed but the duration of their unemployment drastically reduces this probability. Third, the government policies undertaken during the 1980s are found to have been successful in promoting the entrance into self-employment, but not in preventing the exit from self-employment.

Keywords: Self-employment; Transitions; Duration; Unemployment (search for similar items in EconPapers)
JEL-codes: J23 J64 (search for similar items in EconPapers)
Date: 2002-11
New Economics Papers: this item is included in nep-ent and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Working Paper: Self-employment and labour market transitions: a multiple state model (1998)
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