OECD/CERF/CILN International Conference on Self-Employment
Paper SummariesClick on a title below to view a brief summary of the paper presented at the conference.
Self-Employment Trends: International Perpectives.
"Self-Employment in OECD Countries."
David G. Blanchflower (Department of Economics, Dartmouth College, USA)."Self-Employment in Transitional Economies: Entrepreneurship or Disguised Unemployment?"
John S. Earle (Stockholm School of Economics, Sweden) and Zuzanna Sakova (Rutgers University, USA)."The Role of Self-Employment in Job Creation in Canada and the United States."
Country Studies I
Zhengxi Lin (Statistics Canada), Marilyn Manser (US Bureau of Labor Statistics) and Garnett Picot (Statistics Canada)."Self-Employment in France."
Henri Le Marois (ESPACE) and François Hurel (APCE)."Self-Employment in the United Kingdom and Ireland: Current Trends, Policies and Programmes."
Carmel Duggan (WRC Social and Economic Consultants Ltd.)."Self-Employment in Denmark: Trends and Policy."
Country Studies II
Peter Plougmann (Danish Technological Institute)."Urban Self-Employment in Mexico."
Norma Samaniego (Universidad Iberoamericana)."A Framework of Analysis for Self-Employment in Italy."
Fiorenza Belussi (Padua University)."Self-Employment in Australia: Description, Analysis and Policy Issues."
Self-Employment Dynamics Over The Business and Life Cycle
Bruce Chapman and Bob Gregory (Australian National University)."The Transition into Self-Employment: The Importance of Involuntary Separation and Unemployment Duration."
Richard Mueller (University of Maine) and Carol Moore (Center for Naval Analysis)."Explaining the Recent Rise in Self-Employment: Lifecycle, Cohort and Aggregate Economy Effects."
Danny Leung and Chris Robinson (University of Western Ontario)."The Entry and Exit Dynamics of Self-Employment in Canada."
Taxes and Self-Employment
Zhengxi Lin, Janice Yates and Garnett Picot (Statistics Canada)."Effects of the United States Tax System on Transitions into Self-Employment."
Donald Bruce (Syracuse University, New York)."Taxes, Economic Conditions and Recent Trends in Male Self-Employment: A Canada-U.S. Comparison."
Liquidity Constraints and Self-Employment
Herb Schuetze (McMaster University)."Self-Employment and Windfall Gains in Britain: Evidence from Panel Data."
Mark Taylor (ESRC Research Centre on Micro-Social Change, University of Essex, England)."The Effect of Peer Group Lending, Social Capital and Neighbourhood Spillovers on the Performance of the Small-Scale Self-Employed."
Rafael Gomez (University of Toronto)."Spin-offs by Employees in France."
Jean-Francois Rocchi (SOFIREM, France)."Enterprise Creation by the Unemployed: The Role of Micro-finance. An ILO Action Program."
Gender and Self-Employment
Bernd Balkenhol (International Labour Organisation, Geneva)."Do Husbands Matter? Married Women Entering Self-Employment."
Donald Bruce (Syracuse University)."The Self-Employment Dynamics of Men and Women in Canada: 1982 - 1995."
Peter Kuhn and Herb Schuetze (McMaster University)."Consequences of Self-Employment for Women and Men in the United States."
Donald Williams (Kent State University, US)."Self-Employment and Earnings Among Unmarried Fathers: Implications for Child Support Enforcement Policies."
Ethnicity, Race and Self-Employment
Lauren Rich (University of Pennsylvania, US)."Trends in Self-Employment Among White and Black Men: 1910 - 1990."
Robert W. Fairlie (University of California, Santa Cruz) and Bruce Meyer (Northwestern University)."Pushed Out or Pulled In? Self-Employment Among Ethnic Minorities in England and Wales."
Kenneth Clark (University of Manchester, England) and Stephen Drinkwater (University of Portsmouth, England)."Discrimination in the Small Business Credit Market."
David Blanchflower (Dartmouth College, USA), Phillip B. Levine (Wellesley College) and David Zimmerman (Williams College)."Tracking Industrial Location Propensities of 60's Immigrants in Canada: An Analysis of Metropolitan Census Microdata."
Self-Employment Assistance
Ravi Pendakur and Fernando Mata (Heritage Canada, Ottawa)."Business Start-ups By The Unemployed - An Econometric Analysis Based On Firm Data."
Friedhelm Pfeiffer and Frank Reize (Centre for European Economic Research, Mannheim)."Promoting Self-Employment Among The Unemployed in Hungary and Poland."
Christopher O'Leary (W.E. Upjohn Institute of Employment Research, USA)."Self-Employment Assistance: Revised Report."
Wayne Vroman (Urban Institute, Washington, DC)."Earnings Impact of Self-Employment Assistance For the Canadian Unemployed, 1987 -1996."
Ging Wong, Harold Henson and Christopher Riddell (Human Resources Development Canada, Ottawa).
Paper presented as part of panel on:
Self-Employment Trends: International Perpectives.This paper is motivated by a 1989 survey of a random sample of individuals from 11 industrialized countries which asked respondents, if given a choice between being an employee or self-employed which would they prefer. The large differences between the percentages desiring self-employment and the actual self-employment rates in each country imply tremendous pent-up demand for self-employment. Using aggregate data on 23 industrialized countries and cross-section data on 19 countries, Blanchflower examines the nature of this unsatisfied demand from three perspectives: (i) what are the determinants of self-employment rates and status, (ii) are job satisfaction levels higher among the self-employed than among paid-employees and (iii) is the theoretical prediction that increased self-employment rates are associated with greater labour market flexibility and consequently higher growth rates in GDP consistent with the data? At the aggregate level, self-employment rates are found to be negatively related to unemployment rates in all but two countries. At the individual level, the probability of being self-employed is found to rise with age and be higher for men and highest for the least educated. As predicted, levels of job satisfaction are higher for the self-employed. However, there is no evidence that increases in the self-employment rate will result in higher economic growth rates. In fact, the evidence is closer to supporting the hypothesis that higher self-employment rates will exacerbate labour market rigidities.
Paper presented by John S. Earle as part of the panel on:
Self-Employment Trends: International Perspectives.Post-socialist transitional economies provide an ideal setting for examining the relative roles of "entrepreneurial-pull" and "unemployment-push" factors in explaining observed growth in self-employment. On the one hand, the rise in self-employment following market liberalization may reflect the response of individuals driven by entrepreneurial interests that have been historically constrained. On the other hand, the growth in self- employment may have been driven by displaced workers with no prospects for wage or salary employment. Earle and Sakova shed light on the relative roles of these two forces by examining 1993 cross-section data from six transitional economies: Bulgaria, Czech Republic, Hungary, Poland, Russia and Slovakia. The data contains information on the previous and present labour market activities of respondents. The authors find large cross-country differences in both the levels and growth rates of self-employment following market liberalization and in the mixture of the self-employed between those who create paid-employment for others (employers) and those who do not (own-account workers). An empirical analysis is then made to establish how various personal characteristics including family background, previous economic and political status and the receipt of property in restitution influence the probability of being in one of four labour force states: employer, own-account worker, employee or unemployed. The process determining whether an individual is self-employed is found to be different from that determining whether one is unemployed, suggesting that self-employment is not simply a disguised form of unemployment. Finally, both groups of self-employed are found to have higher earnings and job satisfaction levels providing additional evidence against the "push" hypothesis.
Paper presented by Marilyn Manser and Zhengxi Lin as part of panel on:
Self-Employment Trends: International PerspectivesThis paper presents a detailed examination of the contrasting source of job creation during the 1990's in Canada and the US. In the US most of the jobs created in this decade were full-time paid jobs, while in Canada most employment growth was in self- employment and part-time jobs. One possible explanation for the resulting divergence in self-employment rates is a stronger economic downturn in Canada which may have "pushed" more displaced workers into self-employment in Canada than in the US. This hypothesis is supported by a simple comparison of unemployment rates during the same decade. An existing gap between the Canadian and US unemployment rates, dating back to the early 1980's, widened even further in the early 1990's. Using Canadian cross- sectional data from 1979 to 1996 (Monthly Labour Force Survey), the authors empirically investigate the relation between self-employment rates and unemployment rates in both countries. The evidence presented does not support the "push" hypothesis as self- employment rates are found to be weakly related to the unemployment rate over the period considered. In fact, the relation is found to be negative for both men and women. To emphasize this result the authors point to the experience of Canada and the US in the early 1980's when the unemployment rates began to diverge while self-employment rates did not. In conclusion, other possible explanations are offered such as more rapid growth in personal tax rates in Canada, relative attractiveness of health benefits obtained through paid-employment in the US and differences in immigration rates.
"Self-Employment in France."
Paper presented by François Hurel as part of the panel on:
Henri Le Marois (ESPACE) and François Hurel (APCE).
Country Studies IThis paper provides a descriptive analysis of self-employment in France. It begins by emphasizing the absence in French statistics, law or taxation of a distinction between self- employment, or what are called "one-man businesses," and enterprise, which may or may not create employment for others. As a result, self-employment statistics are simply measures of the number of businesses in France. Despite this complication, some useful statistics on the extent of small businesses are provided. For example, it is estimated that three out of four new enterprises do not have employees, whereas half of existing enterprises do. These "one-man businesses" are more likely to have been created by a previously unemployed worker and few of them report intentions to recruit in the future. Further, there has been new promotion in France of self-employment since the early 1980's though it remains largely rooted at the local level. ESPACE Association in Nord- Pas Calais is provided as an example of what can be done at the regional public level to encourage private initiatives. It is argued that growing unemployment and job insecurity are pushing more individuals in the direction of self-employment. To conclude the paper offers three possible approaches to satisfying this growing demand: (i) increase supports for those moving into self-employment, by informing people of their options and reducing their liquidity constraints, (ii) deregulate labour markets to permit more people to have more than one occupation, (iii) simplify tax formalities and (iv) reduce the personal risk associated with small business creation.
Paper presented by Carmel Duggan as part of the panel on:
Country Studies IThis paper is an attempt to present the major trends in self-employment in the UK and Ireland from 1975 to 1997 and to evaluate what types of policies have been most effective in supporting self-employment growth in the two countries. Despite some differences in the self-employment growth rates over time in the two countries, the general patterns have been quite similar. The UK witnessed tremendous growth in self- employment during the 1980's. By 1990, the growth rate had begun to slow and by 1996 it had stabilized. Ireland has seen a similar pattern but it occurred later with large growth in the early 1990's which has since slowed but continues. The experience of both countries has been that self-employment rates may rise in either economic booms or recessions. The types of workers that are self-employed are also roughly similar between the two countries. An exception is that the proportion of the self-employed that are working on a part-time basis is higher in the UK. Also, different trends are apparent when a comparison is made between the percentage of the self-employed in the two countries who have created jobs for other workers. Beginning in 1986 the trends began to diverge as Ireland saw significant growth in this percentage while the UK saw reductions. By 1997, a gap remains between the two countries with Ireland at about 5% and the UK at 3%. Duggan suggests this represents a relative thickening of the micro-business sector in Ireland. The paper concludes with an extensive examination of policy initiatives and finds that although policy has generally been effective in both countries in the creation of new small businesses they have been lacking in their supports to insure that growth rates are sustainable.
"Self-Employment in Denmark: Trends and Policy."
Peter Plougmann (Danish Technological Institute).Paper presented by Peter Plougmann as part of the panel on:
Country Studies IIn this paper, Plougmann argues that changes in self-employment rates in Denmark reflect the choices of individuals motivated by entrepreneurial interests being "pulled" into creating small businesses rather than unemployed workers with no alternatives being "pushed" into entrepreneurial activities. Self-employment rates in Denmark are similar to other OECD countries, but the nature of this self-employment is quite different to the extent that "push" factors have been significant elsewhere. A reason given for the weakness of "push" factors in Denmark is the strong social security system which allows joblessness to be preferable to self-employment for the unemployed. One source of evidence given to support this view is the growing strength of self-employment in Denmark coincident with strong economic growth. Also, attempts to encourage or "push" the long-term unemployed into self-employment have largely been unsuccessful. The primary explanation given is the targeted population of these public initiatives were not qualified to run a business. As a result, the businesses created rarely had survival durations exceeding three years. Nonetheless, public programs have had some success, such as the Home Service scheme, but generally there is little interest in these policies in Denmark.
"Urban Self-Employment in Mexico."
Norma Samaniego (Universidad Iberoamericana).Paper presented by Norma Samaniego as part of panel on:
Country Studies IIStrong economic growth in Mexico from the early 1950's to the 1970's saw strong growth in wage and salary employment and declines in self-employment. This pattern implied the eventual disappearance of traditional self-employment activities in urban areas. However, beginning in the 1970's this pattern was reversed as the share of self- employment in total employment began to increase again. To what extent is this more recent trend associated with the economic downturn over the same period and the "push" of unemployed workers into self-employment? Samaniego suggests that given the absence of unemployment protection schemes in Mexico, we would expect such factors to be important. Her paper is an attempt to explore the factors that determine the entry and exit of people into self-employment in the hope of providing some clues to the role of "push" factors in rising urban self-employment. Considerable information is gathered on the type of workers in self-employment, in terms of age, gender, education, marital status and occupation. However, no clear conclusions are reached with regard to the representation of the otherwise unemployed as the self-employed appear to be a highly heterogeneous group. In addition, support programs for the self-employed in Mexico's urban areas are explored. The general result from this analysis is that programs for the self-employed remain largely at a preliminary and experimental stage and there are still very few financial and technical supports for those making decisions to create small businesses.
"A Framework of Analysis for Self-Employment in Italy."
Fiorenza Belussi (Padua University).Paper presented by Fiorenza Belussi as part of panel on:
Country Studies IIIn contrast to other developed countries, self-employment in Italy has historically been a permanent and important characteristic of the labour market. A broad definition of self- employment suggests that self-employed workers constitute between 30% and 40% of total employment. Moreover, over the last decade this rate has seen increases in both the service and manufacturing sector. Given the unique industrial structure in Italy, there is tremendous complexity in distinguishing the various types of self-employed workers. In an effort to examine the nature of the self-employed, Belussi offers an alternative division to that in earlier literature. Furthermore, she challenges the predominant view of self- employment growth as a means to cure unemployment. Rather, the rise of self- employment should be seen as a natural and permanent tendency away from the traditional employer-employee relationship that characterizes the relations of production in capitalist society. For this reason, the growth of self-employment in Italy should be seen as neither a positive or negative phenomenon. Belussi also examines policy issues and argues that the traditional state support and promotion of self-employment from both ends of the political spectrum helps to explain the relatively high incidence of self- employment in Italy. Finally, it is noted that Italian politicians and policy-makers continue to shy away from policy evaluation initiatives based on "rational" procedures and criteria.
Paper presented by Bruce Chapman as part of panel on:
Country Studies IIFor most industrialized countries over the past twenty years, the proportion of the labour force that are unincorporated owner/managers has been generally stable. However, in Australia there has been a significant increase in this portion of the labour force from about 2% to about 6% since the late 1970's. The authors argue that there is strong reason to believe that this trend largely reflects the relatively higher growth in taxes on wage and salary earners which has created a tax advantage in moving to unincorporated self- employment. Moreover, the authors emphasize the importance of distinguishing between the two forms of self-employment, unincorporated and incorporated businesses, when investigating self-employment issues. For example, they find that rates of the two types self-employment respond very different to business cycle fluctuations and that earnings levels markedly different. Having established this point, an empirical analysis using four cross-section data sets from 1981/82 to 1994/95 is made of the demographic determinants of unincorporated self-employment status and wage and salary earner status. The key result is that the two groups are very different in terms of observable characteristics, such as age, gender, education, marital status, immigration status and the ages and number of dependents. Finally, the authors critically examine the Australian experience with evaluation of the NEIS programme which was intended to support self-employment ventures. An alternative policy approach is also proposed which may be less expensive for governments while still have the potential to attract prospective self-employed workers.
Paper presented by Richard Mueller as part of panel on:
Self-Employment Dynamics Over The Business and Life CycleOver the period 1989 to 1996, over three-quarters of all new jobs in Canada were in self-employment. To what extent does this increase in self-employment reflect increased job loss and unemployment rates? That is, are the newly self-employed being "pushed" into entrepreneurial activities because no other work is perceived to be available? The authors use cross-section data from 1988 to 1990 to investigate the role of these "push" factors in explaining the tremendous growth in self-employment. Specifically, they consider the impact of the unemployment rate at the time of job loss, length of time between jobs and involuntary job loss on the probability of being self-employed. Generally, they find mixed evidence of the role of "push" factors. Workers that experience longer periods of joblessness and who are jobless in period of higher unemployment are more likely to become self-employed. However, workers that lost their jobs involuntarily were no more likely to be self-employed than those that left their previous jobs voluntarily.
Paper presented by Danny Leung and Chris Robinson as part of panel on:
Self-Employment Dynamics Over The Business Cycle and the Life CycleThis paper analyses aggregate and disaggregated trends in self-employment rates in Canada and the US and then goes on to consider the relative importance of cohort, life-cycle and aggregate economic effects on these trends. Between 1967 and 1996, both countries saw a general decline until the mid 1970's when the US saw a short-lived increase in self-employment while Canada witnessed a sharper increase particularly in the 1990's. Further, when the data is disaggregated by occupation and gender important differences between groups of workers are observed. For example, in Canada male rates have tended to decline over the period whereas women have seen substantial increases. The authors then distinguish three effects on self-employment rates: (i) lifecycle effects which reflect the impact of age on self-employment rates, (ii) aggregate effects which reflect broader economic or institutional changes, such as changes in unemployment rates or taxes, which impact the self-employment rates of all cohorts equally and (iii) cohort effects which reflect differing impacts on self-employment rates of these broader changes on particular cohorts of workers. Using cross-section data from both countries and various years, the authors find weak cohort effects but significant age and year effects.
Paper presented by Zhengxi Lin and Garnett Picot as part of panel on:
Self-Employment Dynamics Over The Business and Life CycleRather than simply focus on levels of self-employment, this paper examines entry and exit self-employment flows from three perspectives: (i) the level and the relation to the business cycle of entry and exit flows, (ii) the labour market state that workers entering or exiting self-employment are coming from or going to and (iii) the impact of various personal characteristics and the business cycle on the probability of entering and exiting self-employment. The authors finds flows into and out of self-employment are substantial relative to the level of self-employment. Specifically, gross flows averaged nearly half a million per year between 1982 and 1994 which amounts to 42% of the total self- employment population. There is no evidence that the business cycle is the driving force behind these tremendous flows. Rather, the authors find that young people are more likely to both enter and exit self-employment and prior labour market experience increases the likelihood of entering self-employment as does having a spouse that is self- employed. Finally, the newly self-employed are found to be less likely to be coming from unemployment but more likely to have been out of the labour force. Of those exiting self- employment, on the other hand, between 25% and 40% end up in paid-employment within the first few months, while about 25% become unemployed and the remainder leave the labour force. This movement out of the labour force is found to be high relative to transitions from paid-employment.
This paper was presented by Donald Bruce as part of panel on:
Taxes and Self-EmploymentThis paper examines the extent to which US payroll and income taxes have been an impetus for the movement of wage and salary workers into self-employment. The author uses the Panel Study of Income Dynamics, which is a unique US data set as it provides information on a single cross-section of American workers at various dates. The general finding is that the differential tax treatment of the self-employed in the US is an important factor in explaining transitions from wage and salary employment to self-employment. Specifically, a five percentage point increase in the difference between expected average tax rates for wage and salary workers and the self-employed, is found to increase the probability of entry into self-employment by 0.3 percentage points. On the other hand, an equivalent increase in the marginal tax rate differential reduces the probability by about 2.4 percentage points. This difference in results suggests that those entering self-employment are more sensitive to changes in marginal than average tax rates.
Paper presented by Herb Schuetze as part of panel on:
Taxes and Self-EmploymentBoth Canada and the US have seen a general increase in the levels of self-employment since the 1970's. This paper attempts to explain these trends by focusing on country- specific differences rather than broader changes like technological change and industrial restructuring, which have been evaluated before with little success. Specifically, the differences in macroeconomic conditions and tax systems are put forward as possible explanations of rising male self-employment. Using cross-section data sets from both countries from 1983 to 1994 the author finds that in both countries higher income tax and unemployment rates are associated with increases in self-employment among males. This suggests that increased entry into self-employment can in part be explained by the attraction of being able to more easily under-report income. It also suggests that self- employment is chosen as a response to joblessness. However, the estimates obtained suggest that changes in the tax environment have played a relatively more important role in driving male self-employment trends over the period considered.
Paper presented by Mark Taylor as part of panel on:
Liquidity Constraints and Self-EmploymentCapital constraints are significant in analyses of self-employment issues because they may keep individuals from undertaking entrepreneurial activities or they may impact the growth rates of existing small businesses. This paper indirectly investigates the role of capital constraints on: (i) transitions into self-employment, (ii) survival rates of the existing self-employed and (iii) the growth of those businesses that do survive. It exploits three annual British cross-section data sets that each provide information on the same individuals and asked these respondents in the middle year whether they received any unexpected windfall gains such as inheritances or lottery winnings. To the extent that capital constraints are significant we would expect transitions into self-employment, survival rates and growth rates of small businesses to all increase with the presence of windfall gains. The analysis indicates that windfall gains increase the probability of entry into self-employment as expected. Specifically, the receipt of a £5000 payment almost doubles the probability of entering self-employment. Moreover, this probability increases most with the receipt of redundancy payments. However, the receipt of windfall payments does not appear to impact the probability of remaining self-employed or growth of those businesses that do survive.
Paper presented by Rafael Gomez as part of panel on:
Liquidity Constraints and Self-Employment.This paper examines the impact of peer-centred lending and social capital on the success of the small-scale self-employed as well as the impact of neighbourhood characteristics on the likelihood of receiving micro-credit. By focusing on the small-scale self-employed the author focuses his attention on self-employed workers that do not create jobs for other workers. The author uses a self-designed cross-sectional survey conducted in 1998 of nearly 650 small-scale self-employed individuals living and/or working in Metropolitan Toronto. This data allows him to investigate the possible link between employment success, measured as average monthly business revenues and three broad indicators of capital constraints: (i) accumulated social capital that an individual possesses such as access to social networks and behavioural norms, (ii) peer group lending in which a group of self-employed individuals enter into a contract that requires they collectively monitor and support the activities of each member of the group in return for a loan to finance each member's activities and (iii) characteristics of the neighbourhood in which the individual resides, such as average education levels. The results indicate that the self-employed that graduated from a peer group process earn more than those receiving peer group loans or individual loans. Individuals that reported high levels of social capital along various dimensions also were more likely to enjoy business success. However, there was no evidence that neighbourhood characteristics are important determinants of business success.
"Spin-offs by Employees in France."
Jean-Francois Rocchi (SOFIREM, France).Paper presented by Jean-Francois Rocchi as part of panel on:
Liquidity Constraints and Self-EmploymentThis paper examines spin-offs by employees of existing businesses in France from three perspectives: (i) it considers how spin-off measures are currently undergoing major changes, particularly by making the possibility of more widespread use in the future more likely, (ii) it examines the obstacles that continue to limit the increase of spin-offs and (iii) it considers to what extent and how spin-offs can be promoted. In order to overcome the complication of characterizing spin-offs, the author interprets the phenomenon in its broadest sense. That is, spin-offs are interpreted as referring to any type of encouragement or support provided by a company to an employee or group of employees intended to help the start-up of an independent business on a voluntary basis by these employees. The findings of the analysis suggests that although spin-offs are still not well-established in France they are becoming increasingly common. However, significant obstacles to spin-offs remain so that a concerted initiative by the State and industry/company associations is needed for stronger growth to occur.
Paper presented by Bernd Balkenhol as part of panel on:
Liquidity Constraints and Self-EmploymentThis paper presents both an analysis of the role of micro-finance in Government initiatives to move the unemployed into entrepreneurial activities and an action program for the ILO of how micro-financing should be provided to most effectively encourage such transitions of the unemployed. Evidence of successful micro-financing initiatives are obtained from consideration of such schemes in the US, Canada, France, Germany, Ireland, the United Kingdom and the Netherlands. Self-employment rates in these countries are also considered in the context of micro-financing programs attempting to encourage self-employment growth among the unemployed. For example, the Irish case is put forward as an example of a successful micro-financing initiative. ILO coordinating projects that provide micro-finance to support entrepreneurial activities has been focused on developing countries in the past. This Action Program represents an effort to examine the possibility of extending these programs to industrialized countries. The Program that follows consists of two phases: (i) an orientation and fact-finding stage from 1998 to 1999 in which the ILO will seek to enhance its knowledge of micro-financing programs and (ii) an application phase from 2000 to 2005 in which the recommendation of the 1999 Turin conference will be applied through advice and guidance to policy-makers and micro-finance programs.
"Do Husbands Matter? Married Women Entering Self-Employment."
Donald Bruce (Syracuse University).Paper presented by Donald Bruce as part of panel on:
Gender and Self-EmploymentThe proportion of the labour force that are women and self-employed has been increasing significantly over the last two decades in the US. In 1975, this group represented 4.1% of the labour force and by 1990 they represented 6.7%. Earlier research indicates that women are considerably more likely to enter self-employment if their spouse is self- employed. This paper examines to what extent this reflects the transfer of skills and knowledge specific to self-employment from husbands to wives. Using data on the same random sample of workers from 1970 to 1991, Bruce finds that having a husband that was self-employed in the previous year nearly doubles the probability that a woman will enter self-employment the following year. Moreover, this probability rises even more if a husband is actually self-employed at the time that a woman is contemplating a transition into self-employment. This suggests that inter-family transfers of skills and knowledge is important in determining whether women are self-employed or not.
Paper presented by Herb Schuetze as part of panel on:
Gender and Self-EmploymentThe period 1982 to 1995 saw large increases in the levels of self-employment in Canada. Rather than focusing on changes in the levels, this paper examines flows into and out of self-employment of workers aged 25-54, with an emphasis on differences between women and men. The analysis is made possible by an annual Canadian data set that provides information on respondents' current labour market activities as well as their labour market activities in the previous year. As expected, the results of the analysis indicate that both men and women spent a larger part of their working time, on average, in self-employment in the 1990's than in the 1980's. Also, this increase was higher for women than men. However, the process by which this increase took place was quite different for women and men. Over the period, a larger fraction of men moved to non- employment and individuals without jobs were also more likely to enter self- employment, which in turn led to an overall increase in self-employment among men. For women, on the other hand, self-employment increases reflect improving labour market outcomes rather than responses to joblessness. The authors argue that these results emphasize the importance of examining men and women separately when analysing determinants of trends in self-employment rates.
"Consequences of Self-Employment for Women and Men in the United States."
Donald Williams (Kent State University, US).Paper presented by Donald Williams as part of panel on:
Gender and Self-EmploymentRather than focus on the determinants of self-employment this paper examines the consequences of self-employment with an emphasis on the distinction between men and women. Specifically, Williams considers the impact of having a period of self- employment experience on wage and salary earnings after individuals have moved from self-employment to paid-employment. The empirical analysis involves the use of a data set that provides annual information on a single sample of individuals from 1979 to 1994. It is hypothesized that wage and salary earnings may suffer following a spell of self- employment due to lost wage and salary employment experience, such as training, learning on the job and promotional opportunities. On the other hand, to the extent self- employment leads to the acquisition of new skills, wage and salary earnings may actually benefit from self-employment spells. The findings suggest that there are costs of self- employment spells for women, but not for men, in terms of reduced earnings relative to those women in wage and salary employment with no self-employment experience. The author emphasizes that interpretation of this result requires further research exploring the reasons why women return to wage and salary employment.
"Self-Employment and Earnings Among Unmarried Fathers: Implications for Child Support Enforcement Policies."
Lauren Rich (University of Pennsylvania, US).Paper presented by Lauren Rich as part of panel on:
Gender and Self-EmploymentEstimates of unmarried fathers' incomes in the US tend to be downward biased because they are based on reported incomes and therefore typically do not take into account earnings from "irregular" employment including payments from illegal activities. Using preliminary data from a new US survey that collects information on a single sample of fathers of children born to unmarried mothers at different times, Rich estimates the earnings of unmarried fathers from both regular and irregular sector employment. A comparison of these estimates allows the author to analyse to what extent standard estimates are biased downward. Implications for the ability of unmarried fathers to pay child support and for enforcement of child support policies are then considered. The results indicate that 27% of unmarried fathers have earnings from irregular employment. When this income is taken into account earnings increase by 26%. Using Wisconsin guidelines for child support payments, this implies a rise in payments by almost 30%. This suggests that improved enforcement may enhance the welfare of those fathers' children. However, the author cautions that stricter enforcement may however lead to an increase in earnings in the underground economy.
"Trends in Self-Employment Among White and Black Men: 1910 - 1990."
Robert W. Fairlie (University of California, Santa Cruz) and Bruce Meyer (Northwestern University).Paper presented by Bruce Meyer as part of panel on:
Ethnicity, Race and Self-EmploymentThe self-employment rate in the US saw a gradual decline in the period 1910 to 1970 and then began to increase from 10.0% in 1970 to 11.4% in 1990. Despite concerns over the lack of black-owned small businesses in the country, there is a dearth of research examining black men separately. This paper uses Census data to analyse self-employment trends of white men in the US in the period 1910 to 1990 and then compares trends in self-employment for white and black men in the period 1910 to 1990. The authors find that the 1910 to 1970 decline in the trend for white men reflects technological change shifting employment to large-scale, capital-intensive industry. The rise beginning in 1970 then simply reflects a shift away from these industries to proportionally greater shares of total employment in industries, like services, with a high incidence of self-employment. When the authors focus on black men they find that there was neither a general decline nor a reversal in 1970. Instead, self-employment among blacks has remained roughly constant over the period 1910 to 1990 at about a third of the white rate. This lower rate reflects the fact that blacks are less likely to be self-employed in all industries and not that they are disproportionately employed in industries with little self-employment. A measure of the ratio of average earnings of the self-employed to the average earnings of wage and salary workers can provide some insight into the desirability of self- employment. However, the authors find that this ratio rose more in favour of self- employment earnings for blacks than whites in the period 1950 to 1990. Instead, the authors find that the gap in self-employment rates largely reflects disparities in assets between blacks and whites over the past three decades.
"Pushed Out or Pulled In? Self-Employment Among Ethnic Minorities in England and Wales."
Kenneth Clark (University of Manchester, England) and Stephen Drinkwater (University of Portsmouth, England).Paper presented by Kenneth Clark as part of panel on:
Ethnicity, Race and Self-EmploymentThis paper examines why the proportion of ethnic minorities that are self-employed in England and Wales is high relative to their proportion of the population. Specifically, Britain's non-white minorities had a self-employment rate of 14.6 in 1991 compared to a rate of 12.3 among whites. Two competing theories of this difference in rates are evaluated by the authors. On the one hand, ethnic minorities may face obstacles in achieving wage and salary employment, perhaps due to employer discrimination, which has "pushed" these individuals into self-employment in response to the absence of alternatives. On the other hand, ethnic minorities may be facing stronger "pull" factors such as the presence of communities with a highly concentrated ethnic populations which provide self-sustaining business environments or informal sources of labour through family ties. Using a cross-sectional data set providing information on 5196 individuals of Asian and Caribbean origin and 2867 whites, the authors estimate the relative important of various push and pull factors. The results indicate that discrimination among wage and salary employers is a contributing factor in the over-representation of ethnic minorities in self-employment. However, push factors fail to explain all of the differences in self- employment propensities between whites and non-whites suggesting that pull factors also play a role.
"Discrimination in the Small Business Credit Market."
David Blanchflower (Dartmouth College, USA), Phillip B. Levine (Wellesley College) and David Zimmerman (Williams College).Paper presented by David Blanchflower as part of panel on:
Ethnicity, Race and Self-EmploymentThis paper examines whether discrimination exists in US small business credit markets. Specifically, it considers whether the likelihood of receiving loan approvals varies across different racial groups with identical financial backgrounds. The authors use data from the Federal Reserve Board and the US Small Business Administration to examine whether minority-owned firms that are similar to non-minority-owned firms in all other observable respects are relatively more likely to be denied credit. The results of their analysis suggests that black-owned businesses, and to a lesser extent Hispanic-owned businesses, are less likely than otherwise similar white-owned firms to obtain credit. Furthermore, the authors provide qualitative evidence that minority-owned firms are much more likely to feel discouraged in obtaining credit to finance entrepreneurial activities because of fear of denials. Thus, there is strong evidence of discrimination in US business credit markets.
"Tracking Industrial Location Propensities of 60's Immigrants in Canada: An Analysis of Metropolitan Census Microdata."
Ravi Pendakur and Fernando Mata (Heritage Canada, Ottawa).Paper presented by Ravi Pendakur and Fernando Mata as part of panel on:
Ethnicity, Race and Self-EmploymentThe 1960's saw a fundamental reform of Canada's immigration laws from a system emphasizing family reunification to one aimed at selecting individuals based on skills and education. This decade was also a period of economic structural shifts in Canada away from manufacturing towards service industries. This paper uses Canadian census data from 1971, 1981 and 1991 that contains information on immigrant and non-immigrant workers who live in Toronto, Montreal and Vancouver. Using this data an attempt is made to follow similar groups according to age, birthplace and education across the three years, to examine whether immigrant groups were more likely to enter self-employment than non-immigrant groups of equivalent age and education. The central finding from this analysis was that higher levels of education tended to over-ride the tendency of otherwise similar immigrants with low education levels to find employment in neighbourhoods with high concentrated ethnic populations. Also, dwindling manufacturing businesses, such as needle trades and construction, following structural change toward service industries were found to attract immigrants with low education levels. The authors also find evidence of higher propensities to enter self-employment among immigrants with low education levels. Their analysis suggests that this movement may reflect constraints to achieving wage and salary employment among this group.
"Business Start-ups By The Unemployed - An Econometric Analysis Based On Firm Data."
Friedhelm Pfeiffer and Frank Reize (Centre for European Economic Research, Mannheim).Paper presented by Friedhelm Pfeiffer as part of panel on:
Self-Employment AssistanceIn Germany, transitions from unemployment to self-employment are supported through what are called "bridging allowances." Since 1994 the conditions for receiving these allowances have been relaxed considerably, which led a sharp increase in the number of individuals receiving allowances. Specifically, 90,000 individuals moving from wage and salary employment to self-employment received the allowances in 1996 compared to 25,000 in 1993. This paper examines the impact of bridging allowances on firm survival and employment growth. The authors use firm-level data which allows them to compare otherwise similar new subsidised and non-subsidised firm formations. This analysis requires that the authors employ a statistical model that also takes into account the process determining which firms are subsidised so that the presence of subsidies is not simply reflecting more sustainable and larger businesses. The results indicate that firms receiving bridging allowances are no different than non-subsidised firms in term of survival rates and employment growth. However, due to complications of controlling for the subsidy selection process, the authors caution that the results do not imply that bridging allowances have been unsuccessful.
"Promoting Self-Employment Among The Unemployed in Hungary and Poland."
Christopher O'Leary (W.E. Upjohn Institute of Employment Research, USA).Paper presented by Christopher O'Leary as part of panel on:
Self-Employment AssistanceFormal efforts to promote self-employment among the unemployed began in the 1990's in Hungary and Poland. The author of this paper emphasizes that the experience of mature market economies in reducing unemployment through self-employment assistance should not be applied to countries only recently making transitions to free markets. The reason is that the planned economy in many ways fostered self-employment activities prior to market liberalization as full-time employees of state-owned enterprises responded to labour surpluses on the shop floor by engaging in independent production activities. Using 1997 data on representative samples of both self-employment assistance recipients and a comparison group, the authors examine the impacts of self-employment assistance on reemployment and the earnings of assistance recipients and the secondary effects of self-employment programs in terms of employment creation by the newly self-employed. The impact on unemployment insurance payments is also evaluated. The results of this analysis indicate that the self-employment programs were effective in both countries in terms of reemployment and savings in unemployment insurance. In Poland there was also a large and positive earnings impact. Finally, in both countries there were significant increases associated with the impact on secondary employment. This evidence supports the use of self-employment assistance programs to alleviate unemployment in post- socialist economies.
"Self-Employment Assistance: Revised Report."
Wayne Vroman (Urban Institute, Washington, DC).Paper presented by Wayne Vroman as part of panel on:
Self-Employment AssistanceSeven states in the US have State Unemployment Insurance programs that provide weekly allowances and support services for business start-ups for individuals choosing to transfer from unemployment to self-employment. This report investigates each of these Self-Employment Assistance (SEA) programs in extensive detail and then considers the economic outcomes and costs of SEA. This analysis reveals that SEA programs have been and continue to be small, never reaching more than 0.5 percent of UI recipients. It is argued that this in part reflects low US unemployment rates in recent years. Participants relative to other UI recipients tend to be older, more educated and are less likely to be ethnic minorities. Of those SEA participants that did start their own business, gross sales were modest and appear to require increases for them to be sustainable in the long-run. Finally, the report reveals the difficulty in interpreting cost-benefit analyses of SEA programs due to incomplete data, particularly long-term follow-up information, and lack of appropriate comparison groups.
"Earnings Impact of Self-Employment Assistance For the Canadian Unemployed, 1987 -1996."
Ging Wong, Harold Henson and Christopher Riddell (Human Resources Development Canada, Ottawa).Paper presented by Ging Wong as part of panel on:
Self-Employment AssistanceThe Canadian government introduced measures in 1987 to encourage unemployed individuals to move into self-employment by starting their own businesses. The program has now gone through three main phases moving from a Self-Employment Incentive (SEI) program to a Self-Employment Assistance (SEA) program. The SEI program was active in the period 1987 to 1991. In 1992, the SEA program was introduced which increased funding for participants, extended eligibility to all UI recipients (welfare recipients were also eligible although UI recipients were more likely to be selected for participation due to their relatively more attractive financial benefits), put more emphasis on training and shifted program delivery to the federal government. In 1996, the SEA program was altered as training and increasingly delivery were ceded as a provincial jurisdiction and moves were made to reduce funding. This paper examines the comparative effectiveness of the SEI and SEA programs with particular attention on the earnings of the self-employed. The results indicate large positive benefits of participation in self-employment programs on gross earnings and mild negative effects on net earnings. However, as the programs expanded the positive impacts seem to have weakened. The evidence suggests that the SEA program of 1992 to 1995 led to relatively smaller gains in earnings than the SEI program. The authors conclude that this may reflect the attraction of marginal participants under the SEA scheme as funding was increased and eligibility extended.
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