The Entry and Exit Dynamics of Self-Employment in Canada

Statistics Canada Analytical Studies Working Paper No. 134

32 Pages Posted: 8 Dec 1999

See all articles by Zhengxi Lin

Zhengxi Lin

Statistics Canada

Garnett Picot

Statistics Canada

Janice Yates

Statistics Canada

Date Written: March 1999

Abstract

This paper i) documents the extent and cyclicality of self-employment entry and exit flows; ii) explores transitions to and from self-employment; and iii) investigates the influence of individual characteristics and labour market experience as well as macroeconomic conditions on the probability of moving into or out of self-employment.

The self-employed sector now employs over two and a half million Canadian workers, has expanded on average by over 4% a year so far in this decade and accounted for over three out of every four new jobs the economy has created. There are substantial flows both into and out of self-employment over the last 15 years. Gross flows into and out of self-employment averaged nearly half a million per year between 1982 and 1994, amounting to 42% of the total self-employed population.

Regression results reveal no statistical evidence supporting the dominance of the push hypothesis over the pull hypothesis--the notion that people are increasingly pushed into self-employment by deteriorating economic conditions. This analysis is done both through time-series analysis and the analysis of the determinants of flows into (and out of) self-employment. As in paid employment, younger Canadians are subject to higher turnover in self-employment--they are not only more likely to enter but also substantially more likely to leave self-employment. Prior paid-employment experience and prior self-employment experience are both found to be associated with a higher likelihood of entering self-employment. The longer one is self-employed, the less likely he/she is going to leave the business. Having a spouse in business (being self-employed) substantially increases the likelihood of the other spouse becoming self-employed--a self-employed spouse often attracts the other to either join the family business or start their own. We also find evidence that steady family income through paid-employment from one spouse increases the self-employed's (the other spouse's) affordability to continue with the business venture and hence reduces the likelihood of leaving self-employment.

JEL Classification: J21, J24, J60

Suggested Citation

Lin, Zhengxi and Picot, Garnett and Yates, Janice, The Entry and Exit Dynamics of Self-Employment in Canada (March 1999). Statistics Canada Analytical Studies Working Paper No. 134, Available at SSRN: https://ssrn.com/abstract=182648 or http://dx.doi.org/10.2139/ssrn.182648

Zhengxi Lin (Contact Author)

Statistics Canada ( email )

Ottawa, Ontario
Canada
613-951-0830 (Phone)
613-951-5403 (Fax)

Garnett Picot

Statistics Canada ( email )

Ottawa, Ontario
Canada
613-951-8214 (Phone)
613-951-5403 (Fax)

Janice Yates

Statistics Canada

Ottawa, Ontario
Canada

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