Abstract
This paper analyses the dynamic transitions of self-employment in four states of the Canadian labour market (paid-employment, self-employment, unemployment, and being out of the labour force) by answering three core questions: (1) What are the determinants of the transitions into and out of the four labour market states? (2) Are the probabilities of transitions between immigrants and natives significantly different, and if so, are they due to entry–exit rate gaps between immigrants and natives? (3) What are the proportions of spurious and structural state dependence in the labour market states of immigrants and natives? Our analysis was based on longitudinal data from Canada’s Survey of Labour and Income Dynamics (SLID) for males aged 25 to 55 for the period 1993 to 2004. Our results revealed that immigrants rather than natives are relatively more likely to be self-employed during the unemployment period. The findings also confirmed that males with positive investment income or wealth tended to be largely self-employed. From a policy perspective, the government provision of financial support towards self-employment positively benefits natives in seeking self-employment opportunities. Government policies to lessen labour market discrimination promotes the self-employment of immigrants.
Highlights
The aim of this paper is to identify the main determinants of the transitions of self-employed individuals into different labour market states in Canada
Using longitudinal data from Canada’s Survey of Labour and Income Dynamics (SLID) for males aged 25 to 55 for the period 1993 to 2004, this paper investigates how unobserved individual heterogeneity, structural state dependence, and observable covariates affect individuals’ propensities to stay in or out of the four labour market states
This paper examines the effects of both unobserved individual heterogeneity and observed structural persistence on the flow rate into and out of any of the four labour market states of self-employment, paid-employment, unemployment, and being out of the labour force, among Canadian males as a whole and separately for immigrants and natives
Summary
The aim of this paper is to identify the main determinants of the transitions (in and out) of self-employed individuals into different labour market states in Canada. This study seeks to analyse if entry–exit rate gaps are different between immigrants and natives. It focuses on the dynamic transitions of self-employed individuals by considering four different labour market states: paid-employment, self-employment, unemployment, and being out of the labour force. The growth of total self-employment was much higher in Canada (around 75 per cent) than in the United States (about 37 per cent) over the period 1979–1997. The self-employment rate has remained relatively constant (about 10 per cent) in the United States since the 1990s, but it has largely increased in Canada (14 to 18 per cent) as noted by [1]. The male self-employment rate increased from 8.1 per cent in 1982 to 11 per cent in 1998. These figures were 5 and 7.8 per cent in 1982 and 1998, respectively. (Note: percent is written as per cent)
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