Dependent self-employment across Europe: involuntariness, country’s wealth and labour market institutions

Abstract

ABSTRACT This article investigates the degree of involuntariness in the entrepreneurial activity of the dependent solo self-employed, as well as its association with the country’s wealth and labour market institutions. Using the unique information available in the 2017 European Labour Force Survey (EU-LFS) for 29 countries, we can properly identify the dependent solo self-employed and analyse to what extent they behave in accordance with an occupational choice model when making their self-employment decision. For that, we account for the reasons why they enter into self-employment (voluntarily or involuntarily either out of necessity or requested by the former employer). The results indicate that involuntary self-employment, mostly due to being required by previous employer, significantly increases the probability of being dependent solo versus non-dependent self-employed. The wealthiest countries have a lower incidence of this group of workers, mainly if they are involuntary self-employed. Moreover, labour market institutions that decrease the flexibility of paid employment tend to increase the incidence of dependent solo self-employment. These results point to this group of workers being particularly vulnerable with the degree of vulnerability significantly increasing for those self-employed with a lesser degree of occupational choice.