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Does Solo Self-Employment Serve as a 'Stepping Stone' to Employership?

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  • Cowling, Michael Leith

    (University of Melbourne)

  • Wooden, Mark

    (Melbourne Institute of Applied Economic and Social Research)

Abstract

This paper examines the extent to which solo self-employment serves as a vehicle for job creation. Using panel data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, a dynamic multinomial logit model of transitions between labour market states is estimated. The empirical strategy closely follows that used in a previous study employing household data from Germany by Lechmann and Wunder (2017). Estimates of true cross-state dependence between solo self-employment and employership are obtained that are relatively small. Further, our results imply that the probability of a male remaining an employer just two years after transitioning out of solo self-employment is only 2% (and among women, it is virtually zero). The extent of both true cross-state dependence and true state dependence in employership is, however, much greater among individuals who have demonstrated a preference for self-employment in the past. This implies that pro-entrepreneurial policies that target more 'entrepreneurial' individuals will have more pronounced and long-term effects in stimulating job creation.

Suggested Citation

  • Cowling, Michael Leith & Wooden, Mark, 2019. "Does Solo Self-Employment Serve as a 'Stepping Stone' to Employership?," IZA Discussion Papers 12841, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12841
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    Cited by:

    1. Zhu, Chen & Jin, Zhuo & Lee, Chien-Chiang, 2022. "The impact of informal care from children to their elderly parents on self-employment? Evidence from China," Economic Modelling, Elsevier, vol. 117(C).

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    More about this item

    Keywords

    solo self-employment; HILDA Survey; dynamic multinomial logit; state dependence; stepping stones;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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