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http://hdl.handle.net/10419/55621
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| Title: | | Self-employment in the global economy  |
| Authors: | | Díez, Federico J. Ozdagli, Ali K. |
| Issue Date: | | 2011 |
| Series/Report no.: | | Working paper series // Federal Reserve Bank of Boston 11-5 |
| Abstract: | | This paper studies the eff ects of foreign competition on self-employment levels. We begin by pointing out a previously unknown fact: the greater the exposure to foreign competition, the smaller the fraction of self-employed people. This fact holds across very different countries, across relatively similar countries like European Union members, and across industries within the United States. We develop a model where heterogeneous agents select themselves into being either employees or self-employed in the spirit of Lucas (1978). This, in turn, translates into intra-industry firm heterogeneity as in Melitz (2003). Self-employed agents (firms) can also decide to enter into the export markets, subject to fixed and variable trade costs. The model delivers three basic predictions: (1) domestic self-employment increases with the trade costs of exporting from a foreign country to the home country, (2) domestic self-employment increases with the trade costs of exporting to the foreign country, and (3) higher levels of self-employment are associated with a lower fraction of exporting firms. Our empirical work on inter-industry data for the United States confirms these predictions of the model. |
| Subjects: | | self-employment tariffs international trade |
| JEL: | | F12 F16 J23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Paper Series, Federal Reserve Bank of Boston
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