Self-Employment and Business Cycles
25 Pages Posted: 23 Feb 2010
Date Written: February 22, 2010
The relationship between self-employment and some macroeconomic variables is and has been at the heart of the debate about self-employment contributions to employment and economic growth. This paper is devoted to the exploration of the co-movement and causality between entrepreneurship and economic performance in both directions. It looks for basic relationships between self-employment and some macroeconomic variables in Spain and the US, using quarterly data from 1987:2 to 2004:4. Our results do not support the procyclicality of self-employment in general, but we found strong evidence on procyclicality for a specific group of self-employed: self-employed with employees (employers) in Spain. On the other hand causality tests suggest that the business cycle (GDP or unemployment) causes to employers and provides evidence on instantaneous causality between self-employment/own-account workers and GDP, in Spain. For the US we found weak correlations between self-employment and the business cycle (they tend to become larger when the forecast horizon increases).
Keywords: Self-employment, Entrepreneurship, Spain, US, Time Series models, Business cycles
JEL Classification: L26, E32, M13, C32
Suggested Citation: Suggested Citation