Self-employment in the midst of unemployment: the case of Spain and the United States

Abstract

This article examines the relationship between unemloyment and self-employment. The possibility that self-employment is an alternative for jobless workers is discussed. In doing so, the standard job search model is used to show informally that if workers learn about the job market in the process of looking for work, those who have been unemployed for longer are more likely to become self-employed. Indeed, it was found that for both Spain and the United States the duration of unemployment significantly increases the probability of becoming self-employed. Further analysis indicates that part-time work and the absence of social security coverage are more likely to be associated with self-employed workers. In Spain, it was found that the self-employed without employees earn significantly less than other workers with similar characteristics.