Rising self-employment in the midst of high unemployment: An empirical
analysis of recent developments in Canada
by Zhengxi Lin, Janice Yates and Garnett Picot
Business
and Labour Market Analysis Division
Analytical Studies Branch research paper
series, No. 133
The rise in self-employment through the 1990s has prompted
analysts to ask if this is simply a response to poor economic conditions during
the decade. To address this, the paper focuses on the association between changes
in the self-employment rate and economic conditions, as proxied by both the unemployment
rate and the full-time paid employment to population ratio.
The study concludes
that there is little association between changes in the self-employment rate and
economic conditions over the business cycle. Essentially, both the self-employment
entry rates and the overall self-employment rate have been rising whether the
economy is in recession or expansion. If anything, the econometrics suggest that
as unemployment rises, the self-employment rate falls marginally. This finding
is very robust, supported by the analysis of time-series data on self-employment
rates and economic conditions from the Labour Force Survey (LFS), as well as two
analyses of entry rates to self-employment, one from taxation data and the other
from Survey of Labour and Income Dynamic (SLID) (where entry rates and economic
conditions in different provinces were the focus). This is a cyclical analysis;
a longer-term downward trend in economic conditions (i.e. a long-term structural
decline in economic conditions) may still influence self-employment.
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the full publication.
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