Own-account Workers Research Articles

Return to Education for China’s Return Migrant Entrepreneurs

Summary This paper examines the return to education for entrepreneurs in rural China with a large return migrant survey dataset. By exploiting the unique culture of male dominance in Chinese society, we use women’s education to instrument their husbands’ schooling. The results show that the return to one additional year of schooling ranges between 12.6% and 18.8% for China’s return migrant entrepreneurs, much larger than the estimated returns to education for off-farm wage workers documented in the literature. We also find that the return to education for entrepreneurs who hire paid workers more than doubles that for own-account workers.

The Importance of Being in Control of Business: Work Satisfaction of Employers, Own-Account Workers and Employees

markdownabstract__Abstract__ Self-employed workers can be own-account workers who control their own work or employers who not only are their own boss but also direct others (their employees). We expect both types of self-employed, i.e., own-account workers and employers, to enjoy more independence in determining their work content (type of work) and more flexibility in shaping their work context (e.g., working conditions) compared to paid employees and hence to be more satisfied with their work. Furthermore, we suspect that employers (who can delegate work to their employees and can help them to develop and grow) enjoy even higher levels of work satisfaction compared to both own-account workers (who are their own boss but do not give direction to others) and (non-supervisory) paid employees (who have to obey orders from others within organizational hierarchies). While prior studies typically broadly compare the work satisfaction of self-employed and paid employees, we distinguish employers from own-account workers within the group of self-employed using data from the ECHP for 14 European countries. Our findings indeed show that employers are significantly more satisfied with their work than both own-account workers and paid employees. Additionally, while employers as well as own-account workers enjoy greater procedural utility than (non-supervisory) paid employees stemming from the content and the context of their work, there also seems to be an additional work satisfaction premium for employers.

The stature of the self-employed and its relation with earnings and satisfaction

Taller individuals have on average a higher socio-economic status than shorter individuals. In countries where entrepreneurs have high social status, we may therefore expect that entrepreneurs are taller than wage workers. Using data from the German Socio-Economic Panel (2002–2012), we find that a 1cm increase in an individual's height raises the probability of being self-employed (the most common proxy for entrepreneurship) versus paid employed by 0.15 percentage points. Within the self-employed, the probability of being an employer is increased by 0.10 percentage points as a result of a 1cm increase in height, whereas this increase is 0.05 percentage points for an own-account worker. This result corroborates the higher social status of employers compared to own-account workers. We find a height premium in earnings for self-employed and paid-employed individuals: an additional 1cm in height is associated with a 0.39% increase in hourly earnings for paid employees and a 0.52% increase for self-employed individuals. Our analysis reveals that approximately one third of the height premium in earnings is explained by differences in educational attainment. We also establish the existence of a height premium in terms of work and life satisfaction, which is more pronounced for paid employees than for self-employed individuals.

Entering and Leaving Self-Employment: A Panel Data Analysis for 12 Developing Countries

This paper examines the determinants of labor market transitions into and out of self-employment (own-account work and employer), using panel data from 12 developing countries in multiple regions. Despite cross-country heterogeneity, a few consistent patterns emerge. Entering the labor market through, or moving from wage employment into, own-account work is generally infrequent even during economic downturns, suggesting that own-account work is not an automatic choice for subsistence. Some better educated and older workers become employers by starting their business with paid employees or by growing their business from own-account work, although the overall chances of becoming employers are quite low and employer downsizing to own-account work is common. Reflecting the frequent transitions between own-account work and employer statuses, in many cases, particularly in middle-income countries, a substantial proportion of own-account workers share common characteristics with employers (and vice versa). The results suggest that there is a role for programs to support employers sustain its activities and facilitate own-account workers to become employers.

Is entrepreneurship inherited? A study of intergenerational social mobility in Mexico

The 2006 ESRU Survey on Social Mobility in Mexico is used to identify determinants of the decision to become an entrepreneur and analyze entrepreneurs’ intergenerational (i.e., respondents-parents) household wealth mobility. Entrepreneurs are distinguished from own-account workers. First, we find that entrepreneurship is strongly determined by the father being an entrepreneur and not necessarily by the individual’s initial wealth or educational attainment. Second, the mean ef fect of entrepreneurial activity on individual income is positive and greater for those whose parents belonged to the extreme ends of the socioeconomic distribution. Third, it is more likely for entrepreneurs to experience greater upward wealth mobility than non-entrepreneurs.

Unraveling the relationship between the business cycle and the own-account worker’s decision to hire employees

We study the role of the business cycle in the individual decision of own-account workers to hire employees. Using panel data from the European Community Household Panel for the EU-15 countries, we show that own-account workers are less likely to hire employees during recessions. Next, we focus on identifying the underlying mechanisms of this negative relationship, while bearing in mind that liquidity constraints, unemployment and the prevalence of unpaid family workers are more common during recessions. First, we observe how liquidity constraints reduce the probability of transitioning from own-account worker to employer. Second, additional results from our paper suggest that formal education and former work experience (both work experience in paid employment and venture-specific work experience) are important assets for own-account workers which increase the probability that they create new jobs. Third, as a mechanism partly offsetting the lower probability of job creation during recessions, we also find that own-account workers who are assisted by unpaid family workers are more likely to start employing (salaried) personnel.

The Stature of the Self-Employed and its Premium

markdownabstract__Abstract__ Taller individuals typically have occupations with higher social status and higher earnings than shorter individuals. Further, entrepreneurship is associated with high social status in numerous countries; hence, entrepreneurs might be taller than wage workers. Using data from the German Socio-Economic Panel (2002-2010), we find that a 1 cm increase in an individual’s height raises the probability of being self-employed (the most common proxy for entrepreneurship) versus paid employed by 0.16 percentage-points. Within self-employment the probability of being an employer is increased by 0.11 percentage-points as a result of a 1 cm increase in height whereas this increase is 0.05 percentage-points for an own-account worker. Furthermore, we confirm that a height premium in earnings exists for not only paid employees, as indicated by prior studies, but also for self-emp loyed individuals. An additional 1 cm in height is associated with a 0.44% increase in hourly earnings for paid employees, and a 0.87% increase for self-employed individuals. The predicted earnings differences between short and tall individuals are substantial. Short paid employees—first quartile of height—earn 15.5 Euros per hour whereas tall paid employees—third quartile of height—earn 16.5 Euros per hour; in self-employment the earnings are 12.8 and 14.4 Euros per hour, respectively. Another novel finding is that we establish the existence of a height premium for work and life satisfaction, but only for paid employees. Finally, our analysis reveals that 44% of the height premium in earnings is explained by differences in educational attainment whereas the height premium in work and life satisfaction is only marginally explained by education.

Factors Behind Working Poverty in Romania

Empirical research shows that working poverty (or in-work poverty) has become a serious socio-economic problem at European level, and not only. This paper analyses the main factors behind in-work poverty in Romania, between 2007 and 2011, aiming to identify some possible measure that need to be taken so that in-work poverty decreases. The results highlight that working poverty din Romania, ismainly determinedby employment vulnerability and precarity. The existence of an inefficient employment structure, characterised by high employment in agriculture, high share of self-employment (especially own-account workers and contributing family workers), low labour productivity, low level of the employed population with tertiary education, contributes to an increase in employment vulnerability in Romania, with a negative impact on working poverty. Moreover, low wages generated by an extremely reduced labour productivity; represent an important channel of in-work poverty in Romania. Nevertheless, the results confirm those personal characteristics, job characteristics and the household context determine the extent to which the population is affected by in-work poverty. Therefore, adopting some active policies is required in order to make the transition of employment from poverty to welfare.

Characteristics of self-employment: A refuge from unemployment or road to entrepreneurship

This paper investigates the characteristics of self-employment in a transitional economy, drawing upon Riinvest’s Labour Force and Household Survey evidence from Kosova. Findings based on multinomial logit analysis distinguish employers (i.e., business owners) from own-account workers (i.e., selfemployed) and compare both groups to employees. The paper finds that a switch to own-account workers status is used by individuals as a fallback option to escape unemployment. Individuals may be pushed into own-account status by a lack of work opportunities. Findings also show that remittances have a negative relationship with self-employment. Statistical tests reject the pooling of any of these categories, suggesting significant differences in characteristics of employers and the self-employed.

Self-Employment in the Developing World

Summary This paper analyzes heterogeneity among the self-employed in 74 developing countries, representing two-thirds of the population of the developing world. After profiling how worker characteristics vary by employment status, it classifies self-employed workers outside agriculture as “successful” or “unsuccessful” entrepreneurs, based on two measures of success: whether the worker is an employer, and whether the worker resides in a non-poor household. Four main findings emerge. First, jobs exhibit a clear pecking order, with household income and worker education highest for employers, followed by wage and salaried employees, non-agricultural own-account workers, non-agricultural unpaid family workers, and finally agricultural workers. Second, a substantial minority of own-account workers reside in non-poor households, suggesting that their profits are often a secondary source of household income. Third, as per capita income increases across countries, the structure of employment shifts rapidly, first out of agriculture into unsuccessful non-agricultural self-employment, and then mainly into non-agricultural wage employment. Finally, roughly one-third of the unsuccessful entrepreneurs share similar characteristics with their successful counterparts, suggesting they have the potential to be successful but face constraints to growth. The authors conclude that although interventions such as access to credit can benefit a substantial portion of the self-employed, effectively targeting the minority of self-employed with higher growth potential is important, particularly in low-income contexts. The results also highlight the potential benefits of policies that facilitate shifts in the nature of work, first from agricultural labor into non-agricultural self-employment, and then into wage and salaried jobs.

Persistence in entrepreneurship and its implications for the European entrepreneurial promotion policy

By considering entrepreneurs who hire employees – employers – and entrepreneurs without personnel – own-account workers – as related but distinct groups within entrepreneurship, this work analyzes the roles of different factors in entrepreneurship survival in Europe from a new perspective: contrasting the determinants of own-account workers’ survival with those affecting employers’ survival in the EU-15. Our results confirm the presence of persistence in entrepreneurship. However, we also obtain a strong negative effect on survival of entering entrepreneurship from unemployment. Hence, policymakers should balance these mixed results to evaluate the medium- and long-term suitability of the existing entrepreneurial promotion policy across European regions.

Persistence in Entrepreneurship and its Implications for the European Entrepreneurial Promotion Policy

By considering entrepreneurs who hire employees and own-account workers as related but distinct groups within self-employment, this work analyzes the roles of different factors in self-employment survival in Europe from a new perspective: contrasting the determinants of own-account self-employment survival with those affecting employers’ survival in the EU-15. Our results confirm the presence of persistence in entrepreneurship. However, we also obtain a strong negative effect on survival of entering self-employment from unemployment. Hence, policymakers should balance these mixed results to evaluate the medium- and long-term suitability of the existing entrepreneurial promotion policy across European regions.

How does employment protection legislation influence hiring and firing decisions by the smallest firms?

This paper examines the impact of employment protection legislation (EPL) on hiring decisions by own-account workers and firing decisions by very small firms (one to four employees). Using data from the EU-15 countries, our results show that the strictness of employment protection legislation is negatively related to both these types of decisions, and hence, to labour mobility among the smallest firms. This new evidence may be useful for governments aiming to create a more enabling macro-environment for employment and productivity growth.

Self-employment and the business cycle: evidence from Poland

Two reasons for undertaking self-employment can be distinguished. The first treats self-employment as the only way of avoiding unemployment. According to this view self-employment is countercylical and acts as a buffer. The second reason emphasises the entrepreneurial, risk-taking nature of self-employment, which according to this view is procyclical and similar to wage employment. This article examines these views by looking at labour market flows obtained from the Polish LFS. As the self-employed account for about 20% of the working population in Poland knowledge about their behaviour over the business cycle is of particular importance. The results point to countercyclical behaviour of self-employed farmers and the entrepreneurial nature of own-account workers and entrepreneurs with employees.

Comovement Between Self-Employment and Macroeconomic Variables

The relationship between self-employment and certain macroeconomic variables is often at the heart of the debate about the contributions of self-employment to employment and economic growth; examining this relationship is the aim of this article. This article is devoted to the empirical exploration of the comovement and causality between entrepreneurship and economic performance in both directions. This study searches for basic relationships between self-employment and certain macroeconomic variables in Spain using quarterly data from 1980:1 to 2009:4. From this analysis, four key findings emerge: (a) the relation between self-employment and the business cycle differs across two components of self-employment, that is, employers and own-account workers; (b) the existence of a strong bidirectional causality between self-employment and unemployment and GDP; (c) business cycles contain information valuable for predicting today’s employers; and (d) entrepreneurship promotion policies oriented to encourage the emergence of new job creators may be a cornerstone of a new strategy to combat unemployment. These results should be kept in mind when designing entrepreneurship policies.

De januskop van de zzp’er

The janus face of own-account workers. Are own account workers entrepeneurs of, in fact, employees? The janus face of own-account workers. Are own account workers entrepeneurs of, in fact, employees? Much has been written about own-account workers, however, a corresponding definition of own-account working is lacking. The result of this is that the knowledge about and the policy discussion on this group is confused. The discussion on own-account workers still centres on the question whether own-account workers are entrepreneurs or employees. According to us, the advice of the Social and Economic Council of the Netherlands (SER) including the definition stated in this document has not provided much improvement with regard to this. We think there is not just one type of own-account worker. Own-account working is not a choice for life. For many own-account workers this kind of entrepreneurship is an in-between phase from one job to another or the first step to entrepreneurship with employees. However, the consequences and risks of this choice demand our attention. On the basis of our study, we have arrived at the conclusion that specific national and regional policies aimed at own-account workers would be advisable, in order to: protect own-account workers against the risks of entrepreneurship, save costs for municipalities, encourage later retirement, and support the creation of new jobs.

Entrepreneurship persistence with and without personnel: The role of human capital and previous unemployment

By considering entrepreneurs who hire employees (employers) and entrepreneurs without personnel (own-account workers) as related but distinct entrepreneurship groups, this work analyses factors in entrepreneurship survival from a new perspective: we contrast the determinants of employers’ survival with those affecting own-account workers’ survival. Discrete choice models under competing risks frameworks are applied to data drawn from the European Community Household Panel for the EU-15 (EUROSTAT). Our results suggest that survival chances are markedly higher for employers than for own-account workers—especially when non-employment exits are considered. We also observe that high qualifications have positive and statistically significant effects on survival rates of employers, regardless of exit routes, while high qualifications have no significant effect on survival rates of own-account workers. Finally, we find that entering entrepreneurship from unemployment—the target group for entrepreneurship incentives—strongly increases the probability of re-entering unemployment for both entrepreneurship groups. Thus, entrepreneurship and higher education policies should be considered together to develop high quality entrepreneurial businesses.

Persistence in Entrepreneurship With and Without Personnel: The Role of Human Capital and Previous Unemployment

By considering entrepreneurs who hire employees – employers – and entrepreneurs without personnel – own-account workers – as related but distinct groups within entrepreneurship, this work analyzes the roles of different factors in entrepreneurship survival from a new perspective: contrasting the determinants of own-account workers’ survival with those affecting employers’ survival. Toward this end, discrete choice models under competing risks frameworks are applied to data drawn from the European Community Household Panel for the EU-15 (EUROSTAT). Our results suggest that survival chances are markedly higher for employers than for own-account workers, especially when non-employment exits are considered. We also observe that high qualifications have positive and statistically significant effects on survival rates of employers, whatever exit route, while have no significant effect on survival of own-account workers. Finally, we find that entering entrepreneurship (with and without personnel) from unemployment – i.e., the target group for entrepreneurship incentives – strongly increases the probability of switching back to unemployment. Thus, entrepreneurship and higher education policies should be considered together in order to develop high quality entrepreneurial businesses.

How Access to Credit Affects Self-employment: Differences by Gender during India's Rural Banking Reform

Household survey data for 1983–2000 from India's National Sample Survey Organisation are used to examine the impact of credit on self-employment among men and women in rural labour households. Results indicate that credit access encourages women's self-employment as own-account workers and employers, while it discourages men's self-employment as unpaid family workers. Ownership of land, a key form of collateral, also serves as a strong predictor of self-employment. Among the lower castes in India, self-employment is less likely for scheduled castes prone to wage activity, but more likely for scheduled tribes prone to entrepreneurial work.

Is it a good policy to promote self-employment for job creation? Evidence from Spain

An often applied labour market policy to combat unemployment is to stimulate unemployed individuals to start their own businesses. Such policy may at least, temporarily lead to increases in self-employment, in particular, in the number of own-account workers. These policies may be called successful when the formerly unemployed individuals remain in employment for a longer period of time either as self-employed or as paid-employed worker and also when they become employers they contribute to reduce unemployment not only by creating their own jobs but also by hiring new employees. In this paper we investigate empirically the long-run relationship between the two components of self-employment over the business cycle and discuss its implications for entrepreneurship policy.