Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098457 | Journal of Economic Dynamics and Control | 2014 | 19 Pages |
Abstract
Self-employment comprises an important share of employment in many countries, and tends to expand during downturns through higher inflows from unemployment. Furthermore, countries with higher self-employment shares exhibit lower cyclical output persistence. I build a business cycle model with frictional labor markets where individuals can be self-employed or salaried employed. I show that economies with larger self-employment shares exhibit faster economic recoveries. Differences in the ease of entry into self-employment as the economy recovers explain the contrasting cyclical dynamics. The model successfully captures the cyclical patterns of self-employment and the relationship between self-employment and output persistence in the data.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Alan Finkelstein Shapiro,