Microentrepreneurship and the Business Cycle: Is Self-Employment a Desired Outcome?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper links employment dynamics to the business cycle in order to examine the voluntary nature of self-employment in Argentina. Our results suggest that the transition to self-employment is more common during recessions and that the likelihood of becoming self-employed increases with the length of the recession and the unemployment duration. We find that the majority of self-employed workers do not have employees and earn significantly less than salaried workers. Individuals in this sector are often young and less educated and have trouble obtaining a salaried position regardless of the macroeconomic conditions. Middle-aged, college-educated individuals also tend to enter self-employment as a temporary refuge when they encounter difficulties during a recession. Our results suggest, however, that for entrepreneurs who have employees, entry into self-employment is procyclical and voluntary and has characteristics similar to those predicted for highly skilled risk-taking entrepreneurs. Including idiosyncratic entrepreneurial abilities in a standard job search model allows us to predict such labor market segmentation and the cyclical pattern of entrance into self-employment. Terms of use: Documents inJEL classification: J23, L25, E32

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

“…Employers much more resemble creative and dynamic entrepreneurship than own-account workers (Mandelman & Montes-Rojas, 2009), who are often driven by necessity considerations (Congregado, Golpe & Carmona 2010;Congregado, Golpe & Parker 2012;Mandelman & Montes-Rojas, 2009;Román et al 2013). Evidence emerges supporting that segmentation within the self-employment sector between employers and own-account workers plays a substantial role in determining work satisfaction levels because we find that being an employer significantly increases the probability of a self-employed individual to be satisfied with their work.…”

“…The solo self-employed include a large number of individuals with little entrepreneurial ability who would have preferred to be in wage employment instead (Wiggins, 1995). It has been confirmed that a negative self-selection for own-account workers exists in terms of entrepreneurial ability and that there is segmentation in the self-employment sector between employers and ownaccount workers when taking into account the unobserved ability of individuals (Mandelman & Montes-Rojas, 2009). The choice of labor market state in terms of paid employment versus selfemployment depends on expected utility (Evans & Jovanovic, 1989;Evans & Leighton, 1989;Taylor, 1996;Taylor, 1999).…”

“…This distinction between employers and own-account workers is considered to be relevant, for example, to understand the role that entrepreneurs play in markets and in the process of economic development. It has been highlighted that the self-employed who employ others tend to resemble the dynamic and creative entrepreneurship view and are more likely to represent "entrepreneurial pull", while the own-account workers are more often stagnant and unproductive and more likely to reflect the "unemployment push" (Earle & Sakova, 2000;Mandelman & Montes-Rojas, 2009;Román et al 2013). When the self-employed create jobs for others, this often signals that the business is performing well, and it has been found that the self-employed who employ others on average have higher returns or earnings than own-account workers (Earle & Sakova, 2000;Tamvada, 2010;Sogner et al, 2014).…”

A qualitative study of stress in individuals self-employed in solo businesses.

“…Self-employment is indeed associated with stressors. There is evidence that in emerging markets self-employment is characterized by its "precariousness" (Mandelman, & Montes Rojas, 2007). Thus, one potential stressor is economic insecurity, which can lead to a variety of strains (Ferrie et al, 2001).…”

Financial Development, Entrepreneurship, and Job Satisfaction

“…See for exampleWennekers and Thurik (1999),Reynolds, Bygrave, Autio, Cox and Hay (2002),Stel, Carree and Thurik (2005), van Praag and Versloot (2007).2 See for exampleConstant and Zimmermann (2004),Mandelman and Rojas (2007),Congregado, Golpe and Parker (2009).3 These are also our main points of departure from classic models of entrepreneurship. Seminal contributions in this literature includeKnight (1921),Schumpeter (1934),Lucas (1978),Kihlstrom and La¤ont (1979),Holmes and Schmitz (1990).…”