Does Self-Employment Reduce Unemployment?

17 Pages Posted: 3 Aug 2005  

David B. Audretsch

Indiana University - Institute for Development Strategies; King Saud University; WHU - Otto Beisheim School of Management; Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Martin A. Carree

University of Maastricht - Department of Organization & Strategy

Roy Thurik

Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC); Erasmus Research Institute of Management (ERIM); EIM Netherlands - Business and Policy Research; Tinbergen Institute

Andre J. van Stel

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

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005

Abstract

This paper investigates the dynamic interrelationship between self-employment and unemployment rates. On the one hand, unemployment rates may stimulate start-up activity of self-employed. On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods. These two effects have resulted in considerable ambiguities about the interrelationship between unemployment and entrepreneurial activity. This paper introduces a two equation vector autoregression model capable of reconciling these ambiguities and tests it for data of 23 OECD countries over the period 1974-2002. The empirical results confirm the two distinct relationships between unemployment and self-employment, i.e., 'refugee' and 'entrepreneurial' effects. We also find that the 'entrepreneurial' effects are considerably stronger than the 'refugee' effects.

Keywords: Entreprenuership, Gibrat's Law

JEL Classification: L11, M13

Suggested Citation

Audretsch, David B. and Carree, Martin A. and Thurik, Roy and van Stel, Andre J., Does Self-Employment Reduce Unemployment? (May 2005). CEPR Discussion Paper No. 5057. Available at SSRN: https://ssrn.com/abstract=775830

David B. Audretsch (Contact Author)

Indiana University - Institute for Development Strategies ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States
812-855-6766 (Phone)
812-855-0184 (Fax)

King Saud University ( email )

Riyadh, 11451
Saudi Arabia

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Martin A. Carree

University of Maastricht - Department of Organization & Strategy ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Roy Thurik

Erasmus University Rotterdam (EUR) - Centre for Advanced Small Business Economics (CASBEC) ( email )

3000 DR Rotterdam
Netherlands
+31 10 408 2232 (Phone)
+31 10 408 9146 (Fax)

HOME PAGE: http://www.thurik.com

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

EIM Netherlands - Business and Policy Research

Postbus 7001
2701 AA Zoetermeer
Netherlands
+31 79 341 3634 (Phone)
+31 79 331 3742 (Fax)

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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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