Regional Differences in Self-Employment: Evidence from Croatia

The transition in most countries was accompanied by the burst of unemployment. At the beginning of transition, the new opportunities to start own businesses were expected to release the entrepreneurship potential of the population and lead to fast convergence towards the successful market economies. At the same time, entrepreneurship was expected to alleviate the labour shedding from restructured inefficient industrial sector. The data seldom corroborates this successful transition scenario. This paper provides analysis of the regional differences in self-employment in Croatia during the mature transition 1998-2008 period. Although self-employment cannot be equalized with entrepreneurship, Labour Force Survey as relatively rich data source enables investigation of certain factors that might be partially related to the overall entrepreneurship propensity of the working population in Croatia. Furthermore, analysis of potential regional differences in Croatian labour force entrepreneurship propensity has not been previously quantitatively assessed in the literature. The regional perspective in the paper is used to investigate whether there is a link between the evolution of self-employment and overall unemployment rate in the region (does self-employment help to alleviate unemployment problems?), the share of public sector employment (do chances of finding a secure government job impede entrepreneurship?), economic structure of the region (which economic sectors are more likely to encourage self-employment?) through time. In addition, the characteristics of the self-employed - in terms of gender, age, occupation, education, wage, household characteristics – are compared to those in employment. With this segment of the analysis we try to reveal whether there is higher entrepreneurship propensity within certain population subgroups in Croatia.