Does self-employment reduce unemployment?

A.R. Thurik, M.A. Carree, A. van Stel, D. Audretsch

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper investigates the dynamic relationship between self-employment and unemployment rates. On the one hand, high unemployment rates may lead to start-up activity of self-employed individuals (the “refugee” effect). On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods (the “entrepreneurial” effect). This paper introduces a new two-equation vector autoregression model capable of reconciling these ambiguities and estimates it for data from 23 oecd countries between 1974 and 2002. The empirical results confirm the existence of two distinct relationships between unemployment and self-employment: the “refugee” and “entrepreneurial” effects. We also find that the “entrepreneurial” effects are considerably stronger than the “refugee” effects.
Original languageEnglish
Pages (from-to)673-686
JournalJournal of Business Venturing
Volume23
Issue number6
DOIs
Publication statusPublished - 1 Jan 2008

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