The Role of Dissatisfaction and Per Capita Income in Explaining Self-Employment Across 15 European Countries

Abstract

The differences in the rate of self-employmentduring the period 1978 to 2000 across 15 European countries is explained, focusing on the influence of dissatisfaction and per capita income as determinants of aggregate self-employment.Measures of aggregated dissatisfaction are used in combination with economic, social, and demographic variables of members of the European Union.Motivational factors that influence the willingness to be self-employed are examined at the individual level and considered as to whether they can be aggregated at the national level. Data are drawn from an EIM database (called Compendia 2000.2) and other OECD sources.Two measures of dissatisfaction are used: (1) dissatisfaction with life, and (2) dissatisfaction with the way democracy works.Also measured were self-employment rates, labor income share, and GDP per capita.Findings indicate that, in addition to the significant, negative impact of per capita income, dissatisfaction with life at the level of societies has a significant, positive influence on self-employment levels. Dissatisfaction with life and self-employment are indicators of job dissatisfaction.Two factors for self-employment are identified: push (low wages and job dissatisfaction) and pull (possibility of high profits and tax evasion).Policy makers may want to scrutinize incentive structures in their economies and consider how the educational system contributes to developing entrepreneurial qualities. (TNM)

Keywords: Job satisfaction, COMPENDIA 2000.2, Comparative Entrepreneurship Data for International Analysis, Eurobarometer: Public Opinion in the European Community, Experimental/primary research, Motivation, Self-employment, Income