Small Business Economics

, Volume 15, Issue 2, pp 105–125 | Cite as

The Entry and Exit Dynamics of Self-Employment in Canada

  • Zhengxi Lin
  • Garnett Picot
  • Janice Compton


This paper documents the extent and cyclicality of self-employment entry and exit flows; explores transitions to and from self-employment; and investigates the influence of individual characteristics and labor market experience as well as macroeconomic conditions on the probability of moving into or out of self-employment.

The self-employed sector now employs over two and a half million Canadian workers, has expanded on average by over 4% in the 1990s and accounted for over three out of every four new jobs the economy has created. There are substantial flows both into and out of self-employment over the last 15 years. Gross flows into and out of self-employment averaged nearly half a million per year between 1982 and 1994, amounting to 42% of the total self-employed population.

Regression results reveal no statistical evidence supporting the dominance of the push hypothesis over the pull hypothesis – the notion that people are increasingly pushed into self-employment by deteriorating economic conditions. This analysis is done both through time-series analysis and the analysis of the determinants of flows into (and out of) self-employment. As in paid employment, younger Canadians are subject to higher turnover in self-employment – they are not only more likely to enter but also substantially more likely to leave self-employment. Prior paid-employment experience and prior self-employment experience are both found to be associated with a higher likelihood of entering self-employment. The longer one is self-employed, the less likely he/she is going to leave the business. Having a spouse in business (being self-employed) substantially increases the likelihood of the other spouse becoming self-employed – a self-employed spouse often attracts the other to either join the family business or start their own. We also find evidence that steady family income through paid-employment from one spouse increases the self-employed's (the other spouse's) affordability to continue with the business venture and hence reduces the likelihood of leaving self-employment.


Income Labor Market Family Business Market Experience Macroeconomic Condition 
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Copyright information

© Kluwer Academic Publishers 2000

Authors and Affiliations

  • Zhengxi Lin
    • 1
  • Garnett Picot
    • 2
  • Janice Compton
    • 3
  1. 1.Labour and Household Surveys Analysis DivisionStatistics CanadaCanada
  2. 2.Business and Labour Market Analysis (BLMA) DivisionStatistics CanadaCanada
  3. 3.Economic Studies and Policy Analysis DivisionFinance CanadaCanada

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