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Cross-country differences in self-employment rates: the role of institutions

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  • Roberto Torrini

    (Banca d'Italia)

Abstract

This paper examines the role of institutional variables in determining the large disparities observed in self-employment rates across OECD countries. Our findings suggest that a large public sector reduces the scope for independent work, while high levels of product market regulation are positively associated with the self-employment rate. In countries with high levels of perceived corruption, a high tax and social contribution wedge fosters self-employment, probably because independent work makes it easier to evade tax and social contribution. Cross-country, time-series data show that taxation has an opposite impact in the other countries. The case of Italy, which stands out among developed countries for its large selfemployment rate, is analysed in some detail in the concluding section, providing examples of the importance of the identified institutional variables in fostering self-employment.

Suggested Citation

  • Roberto Torrini, 2002. "Cross-country differences in self-employment rates: the role of institutions," Temi di discussione (Economic working papers) 459, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_459_02
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    More about this item

    Keywords

    self-employment; institutions;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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