Labor Market Policies and Self-Employment Transitions of Older Workers

Abstract

We study transitions in and out of self-employment of older individuals using internationally comparable survey data from 13 OECD countries. We compute self-employment transitions as conditional probabilities arising from a discrete choice panel data model. We examine the influence on self-employment transitions of labor market policies and institutional factors (employment protection legislation, spending on employment and early retirement incentives, unemployment benefits, strength of the rule of law), as well as individual characteristics like physical and mental health. Self-employment is strongly affected by government policies: larger expenditures on employment incentives impact it positively, while the opposite is true for expenditures on early retirement and unemployment benefits.

Keywords: self-employment, transitions, ageing, labor policies, panel data

JEL Classification: J08, J14, J22, J26, L26, C23, C26