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Dependent self-employment across Europe: involuntariness, country's wealth and labor market institutions

Virginia Hernanz and Raquel Carrasco

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper investigates the degree of involuntariness in the entrepreneurial activity ofthe dependent solo self-employed, as well as the effect of the country's wealth and labormarket institutions. Using the unique information available in the 2017 European LaborForce Survey (EU-LFS) for 25 countries, we can properly identify the dependent soloself-employed and analyze to what extent they behave in accordance with anoccupational choice model when making their self-employment decision. For that, weaccount for the reasons why they enter into self-employment (voluntarily orinvoluntarily either out of necessity or requested by the former employer). The resultsindicate that involuntary self-employment, mostly due to being required by previousemployer, significantly increases the probability of being dependent solo versus nondependent self-employed. The wealthiest countries have a lower incidence of this groupof workers, mainly if they are involuntary self-employed. Moreover, labor marketinstitutions that decrease the flexibility of paid employment tend to increase theincidence of dependent solo self-employment. These results point to this group ofworkers being particularly vulnerable with the degree of vulnerability significantlyincreasing for those self-employed with a lesser degree of occupational choice.

Keywords: Labor; Economic; Conditions; Involuntariness; Dependent; Solo; Self-Employed (search for similar items in EconPapers)
JEL-codes: L26 L24 J28 J08 J01 (search for similar items in EconPapers)
Date: 2021-01-26
New Economics Papers: this item is included in nep-ent and nep-eur
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