Does Self-Employment Reduce Unemployment?

25 Pages Posted: 16 Nov 2007

See all articles by Roy Thurik

Roy Thurik

Montpellier Business School; Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC); Erasmus Research Institute of Management (ERIM); EIM Netherlands - Business and Policy Research; Tinbergen Institute

Martin A. Carree

University of Maastricht - Department of Organization & Strategy

Andre J. van Stel

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics

David B. Audretsch

Indiana University - Institute for Development Strategies; King Saud University; WHU - Otto Beisheim School of Management; Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Multiple version iconThere are 2 versions of this paper

Date Written: November 12, 2007

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.

Keywords: entrepreneurship, self-employment, unemployment

JEL Classification: J23, J64, L26, L53, M13, O11

Suggested Citation

Thurik, Roy and Carree, Martin A. and van Stel, Andre J. and Audretsch, David B., Does Self-Employment Reduce Unemployment? (November 12, 2007). Jena Economic Research Paper No. 2007-089. Available at SSRN: https://ssrn.com/abstract=1029672 or http://dx.doi.org/10.2139/ssrn.1029672

Roy Thurik (Contact Author)

Montpellier Business School

France

Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC) ( email )

3000 DR Rotterdam
Netherlands
+31 10 408 2232 (Phone)
+31 10 408 9146 (Fax)

HOME PAGE: http://www.thurik.com

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
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Netherlands

EIM Netherlands - Business and Policy Research

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Netherlands
+31 79 341 3634 (Phone)
+31 79 331 3742 (Fax)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Martin A. Carree

University of Maastricht - Department of Organization & Strategy ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Andre J. Van Stel

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

David B. Audretsch

Indiana University - Institute for Development Strategies ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States
812-855-6766 (Phone)
812-855-0184 (Fax)

King Saud University ( email )

Riyadh, 11451
Saudi Arabia

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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