Notes

^1.

Self-employed owners hire paid workers, unpaid workers (including family members), or work without paid help. They are typically small-sized enterprises in which the entrepreneurs mainly work on their own, or with few staff.

^2.

The National Accounts allocate the transactions in the economy into four sectors – households and unincorporated enterprises, corporations, government and external. This study estimates GDP of self-employed enterprises in the first sector—consisting of unincorporated enterprises. The GDP of self-employed incorporated enterprises is included with the remainder of the business sector, consisting of corporations. According to the Labour Force Survey, self-employment in unincorporated enterprises accounts for just over 60% of all self-employed enterprises in 2005. The study estimates GDP at basic prices.

^3.

Baldwin and Chowhan (2003) studied the impact of self-employment on productivity growth in Canada for the period 1987 and 1998.

^4.

The incorporated sector is comprised predominantly of larger companies, including multinationals. It covers public corporations, national privately controlled corporations, foreign-controlled corporations, as well as government business enterprises.

^5.

See Lin, Yates and Picot (1999) and Hipple (2004). Rispoli (2009) estimated GDP of unincorporated enterprises in the Canadian economy for the period 1997 to 2002.

^6.

See Department of Finance consultation paper (2005) for a discussion of the effective tax rate for unincorporated businesses.

^7.

The study estimates GDP at basic prices. It looks at the business sector and excludes all activity generated by government, the non-commercial sector and owner-occupied dwellings, which combined accounted for about 23% of GDP in 2005.

^8.

For example, Canada Revenue Agency 1994 Taxation Statistics provided data up to 1992 for the various components of unincorporated GDP (wages and salaries, depreciation and interest payments). This was later supplemented, starting in 1998, by Statistics Canada's Tax Estimate Program.

^9.

Canada Revenue Agency's Generalized Index of Financial Information (GIFI), which starts in 1999, is a main indicator for the GDP estimate of corporate self-employment (i.e., offices of physicians and dentists).

^10.

Pilat et al. (2006) discuss the deindustrialisation of the Organization of Economic Co-operation and Development (OECD) economies, that is, the long-term shift of the economy towards services. In many OECD countries, this shift resulted in a decline in the share of manufacturing in overall employment with a concurrent rise in the share of services. In Canada, the manufacturing share of total employment has declined over the past two decades because of rapid employment growth in the service sector, which out-paced the manufacturing sector.

^11.

The estimates in Table 2 are shown at the s-level aggregation, which is based on the North American Industry Classification system (NAICS).A more detailed representation at the w-level aggregation for some of the more important industries in the unincorporated sector is provided in Appendix C. The corporate estimate is provided in Appendix D.

^12.

NAICS Industry 62139 Offices of All Other Health Practitioners includes offices of acupuncturists, dental hygienists, denturists, dieticians, midwives, naturopaths, nutritionists, registered nurses and offices and clinics of podiatrists.

^13.

Kamhi and Leung (2005) suggest that self-employment in the retail sector began to decline in the mid 1990s as it faced increased competition from the entry of many 'big box' retailers during the latter part of the 1990s.

^14.

The Census of Agriculture reported that the average area in hectares per farm reporting increased from 231 in 1986 to 295 in 2006. The number of farms declined from 293,089 in 1986 to 229,373 in 2006. The total farm area has remained relatively stable during this period (67,825,757 in hectares in 1986 to 67,586,739 in hectares in 2006).

^15.

See Fisheries and Oceans Canada (2003).

^16.

The value of fish landings, however has increased over the period as a result of an increase in fish prices and a switch to more expensive non-traditional species (such as shrimp and lobster).

^17.

Rasteletti (2009) suggests that in the presence of labour-market frictions, two types of self-employed workers emerge. The first group includes entrepreneurs, while the second group uses self-employment as stopgap employment.

^18.

It is outside the scope of this paper to estimate GDP for incorporated self-employment, which at present is included with the rest of the corporations in the business sector. Hipple (2004), found that in the United States employment in incorporated self-employment tends to be concentrated in those occupations – management, professionals and related occupations – for which a large proportion of workers have advanced degrees.

^19.

The self-employment rate is expressed as the number of self-employed as a percentage of the labour force. The rate of unincorporated self-employment is expressed as the number of self-employed who are unincorporated as a percentage of the labour force. The rate of incorporated self-employment is expressed as the number of self-employed who are incorporated as a percentage of the labour force.

^20.

Lin, Yates and Picot (1999) found that exits out of self-employment (including both unincorporated and incorporated individuals) were negatively related to unemployment.

^21.

Industry data on the self-employed by class of worker only became available from the LFS starting in 1987.

^22.

The cycle is calculated using a Hodrick-Prescott filter.

^23.

Lin, Yates and Picot (1999, p. 9) used data from an earlier period and found that in Canada, "on average, a 1% increase in the unemployment rate is found to be associated with 0.05% decrease in the overall self-employment level and 0.06% decrease in the overall self-employment rate." These authors did not examine the unincorporated group separately. In contrast, Aaronson, Rissman and Sullivan (2004) found that in the United States from 2002 to 2003, a 10% increase in the state unemployment rate increases the state unincorporated rate of self-employment by between 0.4% and 0.7%, a finding more in keeping with that reported here.

^24.

The Tax Estimate Program estimates by Methodology Division are based on a sample of the T1 data from the Canada Revenue Agency.