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The Evolution of U.K. Self-Employment: A Study of Government Policy and the Role of the Macroeconomy

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This paper reports the findings of a time series analysis exploring the fundamental determinants of the substantial rise in U.K. self-employment over the period 1972–92. The key findings are that the self-employed/wage-employed income differential has a high and positive effect upon the proportion of the workforce in self-employment, supporting alternative wage theories of labour market status, as does housing wealth, supporting credit-rationing theories. Perhaps the most interesting feature concerns the relationship between unemployment and self-employment. On this we find that it is the duration structure of unemployment that matters, not simply the stock of unemployed people. This evidence may imply that self-employment is a last resort for certain individuals marginalized in the employed sector and facing lengthy spells of unemployment.

Document Type: Original Article


Affiliations: 1: Centre for Small and Medium Sized Enterprises, Warwick Business School, 2: ESRC Macroeconomic Modelling Bureau, University of Warwick

Publication date: September 1, 1997


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