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Title:Does self-employment reduce unemployment? PDF Logo
Authors:Audretsch, David B.
Carree, Martin A.
van Stel, André J.
Thurik, A. Roy
Issue Date:2005
Series/Report no.:Papers on entrepreneurship, growth and public policy 0705
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 unemploy-ment and self-employment, i.e. "refugee" and "entrepreneurial" effects. We also find that the "entrepreneu-rial" effects are considerably stronger than the "refugee" effects.
Subjects:entrepreneurship
Gibrat's Law
self-employment
unemployment
JEL:M13
L11
Document Type:Working Paper
Appears in Collections:Discussion Papers on Entrepreneurship, Growth and Public Policy, MPI für Ökonomik

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