The Decline and Rise of Self-Employment

Indications are that the long-term decline of self-employment has come to a halt in the 1970s in the advanced industrialized economies. In this paper, we challenge the currently popular argument that the recent revival of self-employment represents an effective answer to the problems of slow economic growth and unemployment. Our time-series regression analysis of aggregate self-employment rates in eight major OECD countries from the early 1950s to 1987 suggests that rising self-employment may be a response to deficiencies in labour markets rather than a sign of economic vitality.