Self-employment Rates Research Articles

Employment Effects of State Legislation Against the Hiring of Unauthorized Immigrant Workers

We analyze the impact of the 2007 Legal Arizona Workers Act (LAWA) on employment outcomes of low-skilled Arizona workers, with a focus on the states' unauthorized population. The intent of LAWA was to limit unauthorized workers' economic opportunities as a way to deter further illegal immigration and as such is likely to increase poverty among an already marginalized population. Specifically, we assess whether the legislation reduced the formal employment opportunities of the targeted population. We also look for evidence of an unintended consequence of the policy: whether LAWA pushed workers into informal employment, and if so what are the likely consequences for these workers and their families. Using the synthetic control method developed by Abadie, Diamond and Hainmueller (2010), we find no statistically significant pre-post LAWA differences in wage and salary employment rate for the vast majority of workers in Arizona. Only among the workers most likely to be unauthorized – non-citizen Hispanic men with at most a high school education – do we observe a statistically significant relative decline in the probability of wage and salary employment. We also identify a substantial and statistically significant relative increase in the rate of self-employment among the same group of likely unauthorized workers, and not among other groups. Our data suggests that this shift is likely associated with an increase in poverty among unauthorized immigrants.

Ethnic Concentration, Cultural Identity and Immigrant Self-Employment in Switzerland

Immigrant self-employment rates vary considerably across regions in Switzerland. Business ownership seems to provide an alternative to wage labour, where immigrants have to face structural barriers such as the limited knowledge of the local language, or difficulties in fruitfully making use of their own human capital. Despite the historically high unemployment rates with respect to natives, immigrants in Switzerland are less entrepreneurial. It is therefore important to uncover the determinants that may facilitate the transition from the status of immigrant to the one of economic agent. Among others factors, concentration in ethnic enclaves, as well as accumulated labour market experience and time elapsed since immigration, have been associated to higher business ownership rates. In this paper we use a cross-section of 2,490 Swiss municipalities in order to investigate the role played by the ethnic concentration of immigrants, as well as cultural factors, in determining self-employment rates.

The Happy Artist? An Empirical Application of the Work-Preference Model

The artistic labor market is marked by several adversities, such as low wages, above-average unemployment, and constrained underemployment. Nevertheless, it attracts many young people. The number of students exceeds the available jobs by far. A potential explanation for this puzzle is that artistic work might result in exceptionally high job satisfaction, a conjecture that has been mentioned at various times in the literature. We conduct the first direct empirical investigation of artists’ job satisfaction. The analysis is based on panel data from the German Socio-Economic Panel Survey (SOEP). Artists on average are found to be considerably more satisfied with their work than non-artists, a finding that corroborates the conjectures in the literature. Differences in income, working hours, and personality cannot account for the observed difference in job satisfaction. Partially, but not fully, the higher job satisfaction can be attributed to the higher self-employment rate among artists. Suggestive evidence is found that superior “procedural” characteristics of artistic work, such as increased variety and on-the-job learning, contribute to the difference in job satisfaction.

Discrimination Without Taste - How Discrimination Can Spillover and Persist

In this paper we introduce coordination failures driven by beliefs as a channel of persistent discrimination in activities characterized by interdependency in payo ffs and interlinkages across markets. The model shows how discrimination can persist under perfect observability of individual ability, when taste for discrimination has died out, and in the absence of discriminatory social norms, conditions normally assumed in the literature. For the case of self-employment the main result shows that individuals of the discriminated group will have lower participation rates and lower payo ffs despite equal ability, leading to an overall welfare loss. Empirically we find that beliefs about discrimination are a consistently signi ficant factor in the estimation of self-employment rates of blacks in the US. The paper highlights the importance of distinguishing between the various channels of discrimination, as understanding the mechanism behind it is crucial to devising appropriate policy.

Black–White gap in self-employment. Does intra-race heterogeneity exist?

Past research on the determinants of self-employment in the United States has emphasized the importance of ethnicity. In particular, self-employment rates for Blacks lag far behind those of other racial groups for comparable individuals. This research examines two related issues: Does the dummy variable coefficient associated with the Black–White self-employment gap exhibit intra-race heterogeneity? Second, does this variable have diminished or increased impact across generations? We decompose the sample into subgroups and find that the size of the Black–White self-employment gap varies within subgroups of African-Americans.

The Happy Artist? An Empirical Application of the Work-Preference Model

The artistic labor market is marked by several adversities, such as low wages, above-average unemployment, and constrained underemployment. Nevertheless, it attracts many young people. The number of students exceeds the available jobs by far. A potential explanation for this puzzle is that artistic work might result in exceptionally high job satisfaction, a conjecture that has been mentioned at various times in the literature. We conduct the first direct empirical investigation of artists’ job satisfaction. The analysis is based on panel data from the German Socio-Economic Panel Survey (SOEP). Artists on average are found to be considerably more satisfied with their work than non-artists, a finding that corroborates the conjectures in the literature. Differences in income, working hours, and personality cannot account for the observed difference in job satisfaction. Partially, but not fully, the higher job satisfaction can be attributed to the higher self-employment rate among artists. Suggestive evidence is found that superior “procedural” characteristics of artistic work, such as increased variety and on-the-job learning, contribute to the difference in job satisfaction.

Small Businesses in Springfield, Massachusetts: A Look at Latino Entrepreneurship

One of the most pressing challenges for Springfield is increasing the labor force participation and employment rates of its residents. The city’s labor force participation rate is extremely low even when compared with other older industrial cities in the region. In Springfield’s Latino neighborhoods less than half of the working-age population is in the labor force. Through data analysis and interviews of business owners, this study focuses on business ownership as a potential strategy for job creation in the city and for income generation in impoverished areas. Springfield has self-employment rates similar to that of comparison cities in New England and in the past ten years, the number of Latinos self-employed in the city grew by 150 percent, a much faster rate than wage/salary workers. However, Springfield lags in the number of Latino-owned firms relative to the share of Latino population. Latino-owned businesses play an important role in providing additional services and support to Latino residents. Nevertheless, existing funding and technical assistance programs that are generally available to small businesses appear not to be reaching Latino entrepreneurs in Springfield, which tends to inhibit their survival and growth.

Entrepreneurship and Economic Growth: An Investigation into the Relationship between Entrepreneurship and Total Factor Productivity Growth in the EU

Endogenous growth theory assigns an important role for entrepreneurship in the process of economic development. This paper sets to formally test the impact of entrepreneurship on economic growth. Entrepreneurship is represented by a number of proxy variables, whereas Total Factor Productivity is used as a measure of economic growth. Panel data of 26 European countries repeatedly sampled over a period of 11 years is used to estimate a Random Effects model. This study finds that entrepreneurship contributes to growth moderately. It is not, nonetheless, a dominant force shaping changes in TFP growth rates. Business Birth Rate, Self-employment Rate, Business Investment and Labour Productivity Growth were all found to be highly significant. The article concludes that more encompassing measure of entrepreneurship needs to be developed, one that would reflect the complexity of the notion.

Portrait of the South East

Key points More people live in the South East than in any other region or country of the UK - 8.4 million people in 2009. Portsmouth is the most densely populated unitary authority outside London -5,000 people per sq km compared with an average for London of 4,900 Housing in the South East is among the least affordable, with the second highest prices of any English region (after London). In all but nine local authorities the ratio of lower quartile house prices to lower quartile earnings in 2009 was higher than the average for the country Around a third of the working-age population in the South East are qualified to level 4 or higher of the National Qualification Framework, the second highest proportion (after London) Three-quarters of working-age residents are in employment, the highest proportion of any region. Rates of self-employment are among the highest in the UK: in Rother (East Sussex) more than a fifth of the working population is self-employed Employees in the South East had the second highest earnings (after London) of £514 per week in April 2009, 5 per cent above the UK average. Almost a quarter of employee jobs are in the professional and business services and finance sector The value of the economy was £177 billion in 2009, the second highest region (after London). More than 330,000 businesses were located in the South East, almost as many as in London Life expectancy for males in the South East is the highest of any region at more than 79 years; for females the South East is joint highest with the South West at more than 83 years

Determinants of Self‐employment in China: Evidence from Cross‐regional Data

AbstractThis paper presents and tests a series of sources of regional variations in self‐employment rate in China in the 2000s, and illustrates that the stage of economic development is a major explanation for the variations of self‐employment rate across regions over the past decade. The negative relationship between the stage of economic development and self‐employment rate identified in the paper indicates that China has entered the process of fast industrialization, and self‐employment is playing a diminishing role in economic growth and employment. We also find a substitution effect between self‐employment and private enterprises. While both are important components of China's private sector, private enterprises are becoming an increasingly important source of China's economic growth and employment. Furthermore, our findings also imply that when job opportunities are limited, self‐employment in China is likely a forced choice of disadvantaged people who are not qualified for wage jobs.

Explaining preferences and actual involvement in self-employment: Gender and the entrepreneurial personality

This paper investigates an essential aspect of the entrepreneurial personality: why women’s self-employment rates are consistently lower than those of men. It has three focal points. It discriminates between the preference for self-employment and actual involvement in self-employment using a two (probit) equation model. It makes a systematic distinction between different ways in which gender influences the preference for and actual involvement in self-employment (mediation and moderation). It includes perceived ability as a potential driver of self-employment next to risk attitude, self-employed parents and other socio-demographic drivers. A representative data set of more than 8000 individuals from 29 countries (25 EU Member States, US, Norway, Iceland and Liechtenstein) is used (the 2004 Flash Eurobarometer survey). The findings show that women’s lower preference for becoming self-employed plays an important role in explaining their lower involvement in self-employment and that a gender effect remains that may point at gender-based obstacles to entrepreneurship.

The Influence of Role Models on Immigrant Self-Employment: A Spatial Analysis for Switzerland

Theoretical and empirical research suggests a connection between the presence of role models and the emergence of entrepreneurs. Existing entrepreneurs may act as role models for self-employment candidates by providing successful examples. By explicitly considering the self-employment rates of the natives, which may influence locally the decisions of immigrants towards entrepreneurship, we develop a simple model that explains immigrant self-employment rates for a sample of 2,490 Swiss municipalities. In addition, we accommodate for the presence of spatial spillovers in the distribution of rates, and test a spatial autoregressive model which takes into account the average self-employment rates of immigrants living in nearby municipalities. Our evidence shows a significant (positive) effect of such spatial network effects, which are characterized by a quick distance decay, suggesting spatial spillovers at the household and social network level. Additionally, we show that local conditions and immigrant pool characteristics differ, with respect to self-employment choices, when examining separately urban and rural contexts.

Higher Technological Education Graduates’ Entrepreneurship: Results and Conclusions of a Nation-Wide Research Study

Higher education graduates constitute one of the most important parts of the young workforce, and their transition to the labour market is among the main concerns of governments, policy makers and higher education institutes. It has also been argued by numerous scientists that there is a noticeable recognition of the relationship between entrepreneurship and economic growth, and moreover increasing self-employment rates tend to bring subsequent decreases of unemployment. This paper concentrates on the investigation of technological higher education graduates’ entrepreneurship through the analysis of the results of a nation-wide research study carried out in Greece. The conducted survey was addressed through a structured questionnaire to a large random, yet stratified sample of 708 self-employed graduates of five consecutive years. Descriptive statistics was used for investigating the main variables sketching graduates’ entrepreneurship, such as their demography and education, their professional status, the characteristics of their enterprises, the satisfaction from self-employment; and multivariate analysis was applied for detecting the variables affecting significantly the turn to entrepreneurship. The main findings are highlighted and future relevant work is suggested.

Nonlinearities in regional economic growth and convergence: the role of entrepreneurship in the European union regions

Nonlinearities have been identified in recent literature on growth and convergence at the cross-country level and they have been associated with a number of variables of interest such as initial conditions and human capital accumulation. This research takes the analysis at the regional level within a European context while focusing on entrepreneurship and, using semiparametric regression techniques, provides evidence for nonlinear effects of the base-year income per capita on growth suggesting that convergence may be a phenomenon restricted to particular income bands. Entrepreneurship has a positive effect on regional growth and no serious departures from linearity are detected, while evidence for an almost L-shaped relationship between income per capita levels and self-employment rates was produced. A quality-adjusted proxy for human capital stock was found to be a positive and significant determinant of economic growth across European regions but, again, no departures for linearity were detected for this effect.

Affirmative action programs and business ownership among minorities and women

Affirmative action programs are commonly used as a means to level the playing field for minority- and women-owned firms in public procurement markets, and therefore may be a positive factor in business entry and survival. To the extent that affirmative action programs also apply to traditional labor markets, however, they may alter the opportunity cost of starting a business. We utilize the elimination of affirmative action in California and Washington States through voter initiatives to identify the effect of affirmative action on minority and female self-employment rates. In our base specifications, we find evidence of modest increases in self-employment among minorities and women in both California and Washington after elimination of affirmative action, consistent with the hypothesis that the opportunity cost of starting a business fell due to restricting opportunities in the traditional labor markets. The sign of the estimated effect, however, is not uniformly positive when considering specific race/gender groups, and the statistical significance of the main results is somewhat sensitive to the choice of control states.

Credit and self-employment

Abstract The US personal bankruptcy system allows debtors to discharge uncollateralized debts if they give up assets in excess of a threshold known as an “exemption”. However, since exemptions erode repayment incentives, they may increase borrowing costs. Our paper evaluates the tradeoff between credit costs and the insurance against failure created by bankruptcy exemptions. We find that exemptions change self-employment rates and the timing, size, and financing of projects. We also find that the positive relationship between wealth and self-employment rates may not arise from credit constraints: such a relationship is present even when credit is plentiful at low interest rates.

Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars

In this paper we analyze microdata to explore differences in the rates at which American and German workers leave their salaried jobs to become self-employed. We document that the rate of self-employment is lower in Germany than in the U.S., and the rate of transition from wage-earning to self-employment is lower as well. We find evidence that German workers face liquidity constraints that are more severe than those of their American counterparts. Further, the difference in transition rates cannot be attributed to observable differences between German and American workers.

Religious Institutions and Ethnic Entrepreneurship: The Korean Ethnic Church as a Small Business Incubator

Ethnic entrepreneurship is one of the key factors of community economic development. This article explores how religious institutions enhance ethnic entrepreneurship through social capital in the Los Angeles Korean community, which has high self-employment rates and active participation among its Christian congregations. The role of religious institutions is rarely discussed in terms of entrepreneurship. The article finds that religion-based social capital has greatly benefited the small business development of this ethnic community. Korean ethnic congregations have acted as small business incubators through social networking and capital accumulation. In addition, the article asserts that contemporary community development should reemphasize social capital, religious institutions, and entrepreneurship.

Taxation and entrepreneurship in a welfare state

Does tax policy affect the rate of self-employment in a modern welfare state? This question is analyzed empirically based on Swedish data for the entire postwar period. Available tax data indicate that payroll taxes have had a negative influence on the unincorporated rate of self-employment, though the effect is modest. No effects from regular labor income taxation or capital gains taxation are found. The paper improves upon earlier studies in that it tries to separate the effects of different taxes and uses cointegration techniques. A further extension is that it studies a Scandinavian high-tax welfare state. Earlier time-series studies analyzing self-employment and taxation have, with few exceptions, been based on data from countries with relatively low tax levels and less comprehensive welfare systems, notably the USA and the UK.

Employment and self-employment in the wake of Hurricane Katrina

We use data from the monthly Current Population Survey to examine the short- and longer-term effects of Hurricane Katrina on the labor market outcomes of prime-age individuals in the most affected states--Alabama, Florida, Louisiana, and Mississippi--and for evacuees in any state. We focus on rates of labor force participation, employment, and unemployment, and we extend prior research by also examining rates of self-employment. With the exception of Mississippi, employment and unemployment one year after the hurricane were at similar rates as the end of 2003. This aggregate pattern of labor market shock and recovery has been observed for other disasters but masks important differences among subgroups. Those evacuated from their residences, even temporarily, were a harder-hit group, and evacuees who had yet to return to their pre-Katrina state up to one year later were hit especially hard; these findings hold even after controlling for differences in observable characteristics. We also find evidence of an important role for self-employment as part of post-disaster labor market recovery, especially for evacuees who did not return. This may result from poor job prospects in the wage and salary sector or new opportunities for starting businesses in the wake of Katrina.