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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
Article

Abstract

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.

Keywords

Income Labor Market Family Business Market Experience Macroeconomic Condition 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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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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