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Job Creation and the Self-employed Firm Size: evidence from Spain

Emilio Congregado (), Vicente Esteve () and Antonio Golpe ()

No 1202, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: Over the last decade, Spain created more jobs than any other country in Europe; however, now it is destroying them at an equal pace. Nevertheless, the relationship between the level of employment and the level of self-employment has remained relatively stable. In this context, there is a considerable policy interest in the way in which the self-employed firm in Spain creates and destroys employment, i.e., in the role of the self-employed as creators of additional job opportunities. This paper provides evidence of the existence of a long-term relationship between the self-employed firm that hires external labor and employees hired by third parties in Spain, while accounting for the existence of an abrupt shift in the size of self-employed firms during the previous crisis (1991 to 1993). These findings are qualified testing whether this relationship is time-dependent. Our results suggest that the null hypothesis of linear cointegration would be rejected in favor of a two-regime threshold cointegration model, that is, in favor of a time-sensitive relationship with two opposite regimes. These two regimes differ in the way that the two components of the self-employed firm size respond to restore equilibrium. In this paper, alternative rationales for explaining these findings are also discussed.

Keywords: Self-employed firm size; Entrepreneurship; Job Creation; Cointegration; Self-employment; Structural Break; Threshold cointegration (search for similar items in EconPapers)
JEL-codes: C12 C22 C32 J23 M13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012-02
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