Self-employment in 15 European countries 1991-2003

Abstract

The number of self-employed workers in Europe has been in decline since the 1990s. At the same time unemployment has decreased and GDP per capita increased. In this study we analyse macroeconomic causes of these trends for the EU 15. We use data from the European Labour Force Survey for the period from 1991 to 2003. Our panel data analyses suggest that the number of self-employed workers in the EU 15 decreases with falling unemployment, while GPD per capita at first augments but later on diminishes self-employment. Rising real interest rates and rising tax rates decrease self-employment. Unemployment and tax rates seem to enhance especially the number of single entrepreneurs and not the number of self-employed with employees. The findings for Europe suggest that self-employment in itself is not necessarily an appropriate economic policy objective when considering the strong effects on single entrepreneurs and the nonlinear correlation between self-employment and GDP per capita.