17 Pages Posted: 3 Aug 2005
Date Written: May 2005
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: 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
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