The ‘recession-push’ hypothesis reconsidered

  • Emilio Congregado
  • Antonio Golpe
  • André van Stel
Article

Abstract

The relationship between unemployment and self-employment has been studied extensively. Due to its complex, multifaceted nature, various scholars have found a large array of different results, so that the exact nature of the relation is still not clear. An important element of the relation is captured by the recession-push hypothesis which states that in times of high unemployment individuals are pushed into self-employment for lack of alternative sources of income such as paid employment. We make two contributions to this literature. First, we argue that official unemployment rates may not capture the ‘true’ rate of unemployment as it does not include ‘hidden’ unemployed who are out of the labour force. Therefore, we propose a new method where the ‘recession-push’ effect relates not only to the (official) unemployed but also to the inactive population. Second, we argue that the magnitude of the recession-push effect is non-linear in the business cycle, i.e. the effect is disproportionally stronger when economic circumstances are worse. We provide empirical support for our hypotheses by estimating an econometric model on Spanish data.

Keywords

Cointegration Non-linear Entrepreneurship Self-employment Unemployment 

JEL Classification

C32 J24 M13 

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Copyright information

© Springer Science + Business Media, LLC 2011

Authors and Affiliations

  • Emilio Congregado
    • 1
  • Antonio Golpe
    • 1
  • André van Stel
    • 2
  1. 1.University of HuelvaHuelvaSpain
  2. 2.EIM Business and Policy ResearchZoetermeerthe Netherlands

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