Do the Unemployed Become Successful Entrepreneurs? A Comparison between the Unemployed, Inactive and Wage-Earners

29 Pages Posted: 12 Nov 2006

See all articles by Pernilla Andersson

Pernilla Andersson

Stockholm University - Swedish Institute for Social Research (SOFI)

Eskil Wadensjo

Stockholm University - Swedish Institute for Social Research (SOFI); IZA Institute of Labor Economics; Stockholm University Linnaeus Center for Integration Studies (SULCIS)

Date Written: October 2006

Abstract

In many countries unemployed people are helped to become self-employed. Self-employment, however, does not necessarily lead to success. Many leave self-employment after a short period and the economic outcome varies greatly. It is important to learn more about the economic outcome for unemployed who become self-employed. In the first part of the paper we analyse who became self-employed in the period from 1999 to 2002 of Swedish-born men aged 20 to 60 years who were either wage-earners, unemployed or inactive in 1998. We find that the unemployed, and even more the inactive, are overrepresented among those who become self-employed. In the second part of the paper we study the economic outcome of self-employment in 2002 for Swedish-born men who were either unemployed, inactive or wage-earners in 1998. Economic outcome in 2002 is measured using income from self-employment and having employees in the firm. The estimations show that those who were wage earners in 1998 have higher incomes and are also employing other people in their business to a much higher extent in 2002 than those who in 1998 were unemployed or inactive. This indicates that support to unemployed to become self-employed should be implemented with great care.

Keywords: self-employment, unemployment, inactive, occupational choice, occupational mobility, labour income, income

JEL Classification: J23, J24, J30, J60, J62, J68

Suggested Citation

Andersson, Pernilla and Wadensjo, Eskil, Do the Unemployed Become Successful Entrepreneurs? A Comparison between the Unemployed, Inactive and Wage-Earners (October 2006). IZA Discussion Paper No. 2402, Available at SSRN: https://ssrn.com/abstract=944034 or http://dx.doi.org/10.2139/ssrn.944034

Pernilla Andersson (Contact Author)

Stockholm University - Swedish Institute for Social Research (SOFI) ( email )

Kyrkgatan 43B
SE-106 91 Stockholm
Sweden

Eskil Wadensjo

Stockholm University - Swedish Institute for Social Research (SOFI) ( email )

Universitetsvägen 10F
SE-106 91 Stockholm
Sweden

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Stockholm University Linnaeus Center for Integration Studies (SULCIS) ( email )

SE-106 91 Stockholm
Stockholm
Sweden

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