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Self-employment and entrepreneurship in urban and rural labour markets

Giulia Faggio () and Olmo Silva ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the link between self-employment and some salient aspects of entrepreneurship – namely business creation and innovation – in urban and rural labour markets. In order to do so, we combine individual and firm-level data for Britain aggregated at the Travel-to-Work Area level. We find that a higher incidence of self-employment positively and strongly correlates with business creation and innovation in urban areas, but not in rural areas. We also document that more rural than urban workers become self-employed in areas with comparably poor labour market opportunities, although this heterogeneity is not evident when focussing on entrepreneurship. Finally, we show that the misalignment between self-employment and our proxies for entrepreneurship in rural areas disappears once we account for local labour market conditions. Our results suggest that self-employment, business creation and innovation are well lined-up in urban areas because they capture the same economic phenomenon – namely, genuine entrepreneurship. This is not the case for rural areas.

Keywords: entrepreneurship; self-employment; spatial distribution (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-geo and nep-ure
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Published in Journal of Urban Economics, November, 2014, 84, pp. 67-85. ISSN: 0094-1190

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