The Entry and Exit Dynamics of Self-Employment in Canada

Abstract

This paper i) documents the extent and cyclicality of self-employment entry and exit flows; ii) explores transitions to and from self-employment; and iii) investigates the influence of individual characteristics and labour 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% a year so far in this decade and accounted for over three out of every four new jobs the economy has created. There are substantial flows both into and out of selfemployment 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.

Entrepreneurship in the EU: To Wish and not to be

“…Typical explanatory variables include age, education, earnings, capital assets, previous professional experience, marital status, professional status of the parents and scores from psychological tests. Examples of empirical work following this approach can be found in Blanchflower and Meyer (1994), Blanchflower and Oswald (1998), Douglas and Shepherd (2002), Leighton (1989, 1990), Lin, Picot and Compton (2000), and Reynolds (1997), and their finding will be contrasted with ours in later sections. 12…”

The determinants of exit in a developing country: core and peripheral regions

“…As for the differences in the labour market, the literature has concentrated on the effects of unemployment. On the one hand, an increase in unemployment may have a negative impact on exit because self-employed individuals face fewer job opportunities and are thus less prone to exit (Carree and Thurik, 1996;Lin et al, 2001;Nyström, 2007aNyström, , 2007bCarree et al, 2008;Santarelli et al, 2009). On the other hand, unemployment is a proxy for the level of activity of the economy and an increase may result in an increase in the number of exits (Buzzelli, 2005;Brixy and Grotz, 2007;Fertala, 2008).…”

Determinants of entrepreneurial engagement levels in Europe and the US

“…Among the studies finding that education has a significant impact, the nature of the impact varies from study to study -some find a positive relation others a negative one and still others a negative up to some level of education and positive thereafter. 19 The results of Delmar and Davidsson (2000) and 13 Examples of empirical work following this approach can be found in Bates (1990), Blanchflower (2004), Blanchflower and Meyer (1994), Oswald (1998), Blau (1987), Douglas and Shepherd (2002), Leighton (1989, 1990), Grilo and Irigoyen (2006), Grilo and Thurik (2006), Lin, Picot and Compton (2000), Rees and Shah (1986), Reynolds (1997), Wagner (2003) and de Wit and van Winden (1989). 14 Other approaches can be found in the literature.…”