Residential segregation influences on the likelihood of black and white self-employment

This paper estimates a model of potential to enter self-employment based on individual, household and community-level factors. This paper focuses on the impact of segregation on the likelihood of black and white working-age adults to be self-employed workers rather than wage or salary workers. A multi-level analysis combined answers of over 400,000 respondents to the 1990 and 2000 Integrated Public Use Micro Sample (IPUMS) [Ruggles, S., Sobek, M., Alexander, T., Fitch, C., Goeken, R., Hall, P., King, M., Ronnander, C., 2004. Integrated Public Use Microdata Series: Version 3.0 [Machine-readable database]. Minnesota Population Center [producer and distributor], Minneapolis, MN] with structural measures from 327 metropolitan areas from the U.S. Census Bureau's Housing Patterns files [Iceland, J., Weinberg, D., Steinmetz, E., 2002. Racial and ethnic residential segregation in the United States, 1980–2000. Special Report Series, CENSR no.3, U.S. Census Bureau, Washington, DC] to test the influence of each segregation process. The two residential segregation processes (relative clustering and exposure) were found to limit and enhance potential entry into self-employment, but in unique ways for each group.     

Dependent self-employment as a way to evade employment protection legislation

This paper examines whether the strictness of employment protection legislation encourages employers to contract out work to their own paid employees by the formula of dependent self-employment, while making transitions to independent self-employment less likely by altering the relative valuation of risk between salaried work and self-employment in favour of the former. In conducting this analysis, discrete choice models are applied to data drawn from the European Community Household Panel from 1994 to 2001. To test the hypotheses, a tentative individual measure of the potential severance payment that a worker would receive in the case of dismissal is included as well as aggregated variables that try to capture differences in labour market institutions and macroeconomic conditions. Evidence for a positive impact of the strictness of employment protection legislation and the potential severance payment on transitions to dependent self-employment is found. The opposite effects, however, are detected for individuals becoming independent self-employed.     

Racial segregation in the public schools and adult labor market outcomes: the case of black Americans

Residential segregation has played a central role in theories of minority entrepreneurship and in the diversification of the U.S. labor market. Racial diversity in public accommodations, including schools, has been an issue of continuous public policy debate at least since the U.S. Supreme Court’s Plessy versus Ferguson decision (1896). This study applies theory from the literature on social capital to an examination of the role of racial segregation in the public schools of blacks during childhood on their adult likelihood to become self-employed and their level of occupational status. The model results indicate that, after controlling for a number of individual, household and metropolitan-area factors, lower rates of segregation during public schooling results in higher likelihood of wage-salary employment and self-employment among a cohort of black Americans that attended public schools during the 1960s.     

Self-employment entry across industry groups

Highly educated individuals possessing a net worth exceeding $100,000 are the most likely to enter self-employment. Recent studies have linked personal wealth holdings positively to self-employment entry, but educational attainment has been a weak and erratic determinant of self-employment status. Although barriers such as financial capital constraints clearly shape self-employment entry decisions, the nature of these barriers varies substantially across small business industry groups. The strong role often played by education and work experience in identifying self-employment entrants is often obscured by inappropriate aggregation across industries.Entry barriers shape not only the decision to enter self-employment but also the types of industries that potential business owners are likely to enter. The likelihood of self-employment in skilled services increases greatly as level of education rises, whereas the opposite situation prevails in construction. The major barriers to self-employment entry in manufacturing and wholesaling are clearly financial in nature. In contrast, the primary route to self-employment in the growing skilled services industries is the attainment of advanced educational credentials; personal wealth holdings are secondary.Several factors perform consistently in identifying self-employment entry across industries. The likelihood of entry increases with age, peaking as people approach age 40 and then leveling out. African-Americans are less likely to pursue self-employment than nonminorities.Factors associated with self-employment entry among women are quite different than those that predict male entry, but this partially reflects the differing industry concentrations among men and women. Women are more likely to enter self-employment in skilled services fields. Thus, advanced education and work experience—the human capital variables—are the strongest predictors of female entrants.Barriers to self-employment are most binding to those who possess neither the human capital nor the financial capital traits associated with entry. For others, barriers need not deny access to self-employment—rather, they may simply shape the industry choice. This study is based upon the 1984 Survey of Income and Program Participation (SIPP), a longitudinal survey of households carried out by the U.S. Bureau of the Census. Entry into self-employment was observed over a 32-month period for a sample of 24,428 adults.     

Public health insurance,individual health,and entry into self-employment

We investigate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into self-employment. Health insurance systems that distinguish between the two sectors of employment create incentives or disincentives to start a business for different individuals. We estimate a discrete time hazard rate model of entry into self-employment based on representative household panel data for Germany, which include individual health information. The results indicate that an increase in the health insurance cost differential between self-employed workers and paid employees by €10 per month decreases the probability of entry into self-employment by 1.7% of the annual entry rate. This shows that entrepreneurship lock, which an emerging literature describes for the system of employer-provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health-care reforms.     

Intergenerational transmissions in immigrant self-employment: Evidence from three generations

This paper presents the first study of intergenerational transmissions in immigrant self-employment across three generations. Based on a Swedish data set, the results show that having a self-employed father, as well as having a self-employed grandfather, has a positive effect on self-employment propensities for male third-generation immigrants. For native Swedes having a self-employed father is of importance for self-employment propensities, while having a self-employed grandfather is not. Evidently, there appears to be a generational link in self-employment across three generations for immigrants, but not for natives. Since immigrants transfer general self-employment abilities, third-generation immigrants with self-employed ancestors are over-represented in self-employment. Many of them, however, are not necessarily in the same business line as their fathers. In contrast, when natives transfer general self-employment abilities, their offspring tend to become self-employed in the same business line as their fathers.     

Push and pull factors and Hispanic self-employment in the USA

This study examines the main push and pull factors driving Hispanic self-employment in the USA by modeling the self-employment decision as a function of sectoral earnings differences, country of origin, and other factors. Findings indicate that a main reason Hispanics engage in self-employment is they can earn more working for themselves than in wage/salary work. Immigrants appear to be pushed into self-employment as a result of limited opportunities in the wage work sector. Although low relative earnings in wage/salary work could push workers with limited English proficiency into self-employment, our findings indicate barriers to this. Results suggest that workers pulled into self-employment are those with more work experience and a college degree. Workers who originate from Southern South America and Colombia have relatively high self-employment rates, while Mexico-origin workers have relatively low self-employment rates. We also uncover differences across Hispanic origin groups in terms of the influence of gender, education, and personal wealth on self-employment participation.     

Entrepreneurial Women and Men: Two Different Species?

The ability of the self-employed to create additional job opportunities is a fundamental concern given the huge increases in public resources targeted at new venture creation in the U.K. and other countries since 1979. This study initially concentrates on identifying differences in the personal and demographic characteristics of women and men in four potential labour market states, namely; unemployment; waged employment; single self-employment, and; job creating self-employment. It then goes on to consider labour market transitions over a four year period between 1991 and 1995. The key findings are firstly that women entrepreneurs are better educated than their male counterparts and secondly that flows into self-employment were considerably higher for men than women. Furthermore, proportionately, three times as many male self-employed in 1991 had gone on to become job creating self-employed by 1995.     

Women's self-employment: An act of institutional (dis)integration? A multilevel,cross-country study

In this paper we investigate the extent to which gender equality disintegrates women's self-employment choice (compared to that for men) and whether this is contingent upon a country's development stage and industries. We rely on symbolic interactionism to argue that employment choices emerge from an interactive conversation between individual and social institutional processes. Using data from 61 countries, we find that overall gender equality is associated with the gender gap in men's and women's self-employment choices and that this association depends upon the country's development stage and industries. Contributions are made to women's entrepreneurship and institutional theory.     

Self-Employment Status: The Role of State Dependence and Initial Circumstances

This paper uses British longitudinal data to model self-employment status. In contrast to previous studies, the modelling approach accounts for state-dependence and unexplained heterogeneity effects. The paper concludes that state dependence is an important influence on self-employment choice. Someone self-employed last year is, controlling for observable and unobservable influences, 30 percentage points more likely to be self-employed this year than someone who was in paid employment a year ago. We also find significant individual heterogeneity in the probability of self-employment, with significant explained influences operating through gender, educational attainment, occupation, spouse's self-employment, and parental and educational background. Significant, though quantitatively smaller influences come though initial financial circumstance and current house price movements. Local labour market shocks do not appear significantly to influence self-employment choice. This we conclude that the autoregressive nature of self-employment time-series would appear to be a structural rather than a cyclical phenomenon.     

Youth Self Employment: Its Nature and Consequences

This paper examines the extent of self-employment, characteristics of the self-employed, and the returns to self-employment experiences for a sample of teenagers and young adults in the United States. Using data from the National Longitudinal Survey of Youth, we find that the self-employment experience of youth is quite different from that of adults. Consequences of youth self-employment, measured at age 27, suggest both positive and negative effects.     

The experience of the founder and self-employment duration: a comparative advantage approach

This paper investigates how the initial experience of a founder affects self-employment duration in a competing risks setting. The analysis uses survey data that provide new perspectives on the role of the founder??s experience. The analysis concentrates on the importance of a balanced skill set for self-employment duration. The results show that most self-employed individuals find themselves unemployed upon ending their self-employment. Firm-level characteristics are less significant in explaining self-employment duration, while experience and motivation appear to be driving forces for self-employment longevity. The findings support the importance of combined practical experience and adequate skills. Having broad experience combined with competence in sales/business is one of the most important factors for self-employment duration. Contrary to most other studies, the results show that previous self-employment experience is associated with early exits.     

The Entry and Exit Dynamics of Self-Employment in Canada

This paper documents the extent and cyclicality of self-employment entry and exit flows; explores transitions to and from self-employment; and investigates the influence of individual characteristics and labor market experience as well as macroeconomic conditions on the probability of moving into or out of self-employment.The self-employed sector now employs over two and a half million Canadian workers, has expanded on average by over 4% in the 1990s and accounted for over three out of every four new jobs the economy has created. There are substantial flows both into and out of self-employment over the last 15 years. Gross flows into and out of self-employment averaged nearly half a million per year between 1982 and 1994, amounting to 42% of the total self-employed population.Regression results reveal no statistical evidence supporting the dominance of the push hypothesis over the pull hypothesis – the notion that people are increasingly pushed into self-employment by deteriorating economic conditions. This analysis is done both through time-series analysis and the analysis of the determinants of flows into (and out of) self-employment. As in paid employment, younger Canadians are subject to higher turnover in self-employment – they are not only more likely to enter but also substantially more likely to leave self-employment. Prior paid-employment experience and prior self-employment experience are both found to be associated with a higher likelihood of entering self-employment. The longer one is self-employed, the less likely he/she is going to leave the business. Having a spouse in business (being self-employed) substantially increases the likelihood of the other spouse becoming self-employed – a self-employed spouse often attracts the other to either join the family business or start their own. We also find evidence that steady family income through paid-employment from one spouse increases the self-employed's (the other spouse's) affordability to continue with the business venture and hence reduces the likelihood of leaving self-employment.     

The determinants of changes in U.S. self-employment, 1968–1987

Summary The self-employment rate depends on the distribution of full-time workers across ages, educational levels, and industries and on tax rates and business conditions. About 90 percent of the variation in self-employment across time and across age groups is explained by these factors. Swings in the self-employment rate over time result from the interplay of changes in these factors. The entry of the baby-boom generation into the labor-force beginning in the later 1960s has led to a decrease in the average age of the full-time nonagricultural workforce and has tended to decrease the self-employment rate. The secular decline of manufacturing, the secular rise of services, and secular increases in educational levels have tended to increase the self-employment rate. Fluctuations in business conditions and tax rates have also affected the self-employment rate. The evidence reported here suggests that self-employment is procyclical, although not strongly so. Increases in effective federal income during the late 1970s tended to increase self-employment rates while decreases during the Reagan years tended to decrease self-employment rates.These findings are helpful for speculating about the answers to three important questions. First, are people more entrepreneurial than they used to be? The fact that the ebb and flow of self-employment over time can be explained almost entirely by structural changes in the economy suggests that people with given demographic characteristics and morking in particular industries have not become more likely to try entrepreneurship²⁸.Second, did the supply of entrepreneurs increase during the Reagan years? The answer is yes and no²⁹. The number of people who operate full-time businesses has certainly increased: from 5.99 million in 1981 to 6.46 million in 1985. The absolute supply of entrepreneurs has risen. But the number of people who are full-time wage workers has also increased: from 65.2 million in 1981 to 71.6 million in 1985. The fraction of workers who operate businesses has fallen: it increased from 9.3 percent in 1981 to a peak of 10.0 percent in 1983 and then fell to 9.1 percent in 1985. The relative supply of entrepreneurs has thus fallen. Ironically, one of the many causes for the decline in the relative supply of entrepreneurs was the decrease in tax rates that were, according to supply-side advocates, supposed to have increased entrepreneurship³⁰.Third, will we see rising or falling self-employment in the coming decade? Predicting future rates of self-employment is treacherous because these rates depend upon many factors. The aging of the baby-boom generation will by itself lead to sharply increasing rates of self-employment as the baby-boomers, who started turning 40 in 1985, pass through the peak years of self-employment. This upward trend may be offset by a number of more fragile structural changes in the economy. The sharp decline of the dollar may reinvigorate manufacturing at the expense of services. If so, self-employment will decline. Further lowering of federal income tax rates may reduce the gains from tax-avoidance through self-employment and thereby impart a further downward trend in self-employment rates. Other changes that have helped increase self-employment may have run their course. Female labor-force participation rates and educational levels among both men and women may have reached a plateau. If so, these factors will cease to be a factor in changing self-employment rates.This paper has analyzed the determinants of changes in the aggregate rate of self-employment across age cohorts. When examining aggregate rates of self-employment we have ignored more subtle questions concerning why particular individuals choose to try self-employment at particular times in their careers and what makes a successful entrepreneur. These questions await future research.We would like to thank Jules Lichtenstein and Edward Starr for helpful comments and suggestions.     

Gender and field of study as determinants of self-employment

This article concentrates on gender differences among university graduates with respect to self-employment. We investigate the characteristics of self-employed men and women, focusing in particular on the contribution of field of study as a determinant of the gender gap in self-employment rates. Our approach is based on probit regressions and on the application of a non-linear decomposition technique to the gender gap in self-employment. We find that age and field of study account for two-thirds of the observed gender gap in self-employment.     

Is self-employment really a bad experience? : The effects of previous self-employment on subsequent wage-employment wages

We use propensity score matching methods to quantify the effects of past self-employment experience on subsequent earnings in dependent employment using data on the population of Danish men observed between 1990 and 1996. Our results generally confirm existing studies in that we find that a spell of self-employment is associated with lower hourly wages compared to workers who were consecutively wage-employed. We also show, however, that this effect disappears—and even becomes positive in some settings—for formerly self-employed who find dependent employment in the same sector as their self-employment sector. Hence, the on average negative effect of self-employment is rather caused by sector switching than by the self-employment experience per se. Moreover, formerly self-employed who either enjoyed a high income or hired at least one worker during their self-employment spell receive wages in subsequent dependent employment that are at least as high as for individuals who have been consecutively wage-employed.     

Self-employment: the role of intellectual property right laws

Little is known about the impact of intellectual property rights (IPRs) on typically imitative self-employment. IPR laws have contrasting dual innovation creation and access effects on self-employment activity. The first effect is positive where strong IPR laws promote innovation and so create new opportunities for self-employment. The second effect is negative where strong IPR laws restrict access to innovation and technology used as inputs to self-employed businesses. Using a 33-country dataset over the period 1995?C2000, we estimate the impact of IPR laws on self-employment, helping to fill the vacuum of empirical evidence that has plagued policy decision making in this area. We find that patent activity has a negative effect on self-employment. However, overall, we find that more extensive and strong IPR laws have a net positive effect on self-employment activity.     

Determinants of self-employment survival in Europe

This paper investigates the determinants of self-employment survival in Europe in two stages. The first one focuses on the effect of variables at the individual level, while the second raises questions regarding specific regional factors through the introduction of macro variables. In conducting this analysis, discrete choice models, including both single and competing risks frameworks, are applied to data drawn from the European Community Household Panel from 1994 to 2001. Different destination states are considered: paid employment, unemployment and inactivity. This allows us to search for the underlying determinants of these different hazards. The results suggest a positive impact on survival of formal education and previous experience within the labour market. In addition, we find that entering self-employment from unemployment has a strong negative effect on survival within self-employment. However, our results also show that the expenditure on start-up subsidies decreases the risk of exiting self-employment specifically for the group of individuals entering self-employment from unemployment. Therefore, the availability of these incentives might be seen by policymakers as not only a route to increase entry into self-employment, but also as an adequate instrument for equalising survival chances across individuals entering self-employment from unemployment and those entering with a different starting status.     

Grit and self-employment: a multi-country study

Blending the literatures on grit and self-employment, we propose the role of grit in separating the self-employed from the employed. Based on a sample of 13,210 respondents from nine countries, our results indicate that not only is grit related to self-employment, but also grit is more strongly related to self-employment for risk-takers, females, and younger individuals. The findings are robust, controlling for several individual characteristics and alternate specifications, and have implications for the broader literature on self-employment.     

Does unemployment lead to self-employment?

The currently burgeoning literature on the nature of and the causes for the recent reverse in the downward trend in self-employment in many developed economies, contains a somewhat inconclusive debate on the relationship between unemployment and self-employment, and whether self-employment fluctuates pro- or countercyclically. This paper reviews this literature, presents some recent evidence for EC countries, and argues that the approach in the previous research of searching for relationships between unemployment and self-employment stocks is fundamentally inappropriate. A new approach, based on an analysis of inflows to and outflows from self-employment, is called for.I would like to thank Steve Johnson, Günther Schmid, David Storey and an anonymous referee for helpful comments and suggestions on an earlier draft of the paper.