Wage Employment, Unemployment and Self-Employment across Countries

Markus Poschke

No 16271, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Poor countries have low wage employment and high self-employment. This paper shows that they also have high unemployment relative to wage employment, and that self-employment increases with this ratio. To understand the sources of these patterns, I build a search and matching model with choice between job search and self-employment and with learning about matches, and calibrate it to match all transition rates between wage employment, unemployment and self-employment as well as separation hazards by job duration, separately for all 37 countries with available data. Quantitative analysis of the model shows that labor market frictions affect self-employment as much as unemployment. Labor market frictions also reduce aggregate output, not only by raising unemployment, but also by worsening the average quality of both wage employment matches and active self-employment projects.

Keywords: labor market frictions; self-employment; unemployment; wage employment; occupational choice; productivity (search for similar items in EconPapers)
JEL-codes: E24 J64 L26 O11 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2023-06
New Economics Papers: this item is included in nep-dge, nep-ent, nep-iue and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: Journal of Monetary Economics. 2025, 149, 103684

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Related works:
Working Paper: Wage Employment, Unemployment and Self-Employment across Countries (2019)
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