The 'Recession-Push' Hypothesis Reconsidered

20 Pages Posted: 29 Mar 2009

See all articles by Emilio Congregado

Emilio Congregado

University of Huelva

Antonio A. Golpe

University of Huelva; University of Huelva - Economics and Statistics

Andre J. van Stel

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

Date Written: March 28, 2009

Abstract

The relationship between unemployment and self-employment has been studied extensively. Due to its complex, multifaceted nature, various scholars have found a large array of different results, so that the exact nature of the relation is still not clear. An important element of the relation is captured by the recession-push hypothesis which states that in times of high unemployment individuals are pushed into self-employment for lack of alternative sources of income such as paid employment. We make two contributions. First, we argue that official unemployment rates may not capture the 'true' rate of unemployment as it does not include 'hidden' unemployed who are out of the labour force. Therefore, we propose a new method where the 'recession-push' effect relates not only to the (official) unemployed but also to the inactive population. Second, we argue that the magnitude of the recession-push effect is non-linear in the business cycle, i.e. the effect is disproportionally stronger when economic circumstances are worse. We provide empirical support for our hypotheses using quarterly data for Spain over the period 1976-2004.

Keywords: self-employment, unemployment, time-series models, threshold cointegration, nonlinearity, refugee effect, recession-push hypothesis, Spain

JEL Classification: C32, J24, M13

Suggested Citation

Congregado, Emilio and Golpe Moya, Antonio Anibal and van Stel, Andre J., The 'Recession-Push' Hypothesis Reconsidered (March 28, 2009). Available at SSRN: https://ssrn.com/abstract=1369705 or http://dx.doi.org/10.2139/ssrn.1369705

Emilio Congregado (Contact Author)

University of Huelva ( email )

Departament of Economics
Plaza de la Merced, 11
Huelva, Huelva 21002
Spain

HOME PAGE: http://www.uhu.es/emilio.congregado

Antonio Anibal Golpe Moya

University of Huelva ( email )

Huelva
Spain

University of Huelva - Economics and Statistics ( email )

Plaza de la Merced 11
Huelva, Huelva 21071
Spain
0034959217832 (Phone)
0034959217828 (Fax)

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

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