Microentrepreneurship And The Business Cycle: Is Self-Employment A Desired Outcome?

This paper links employment dynamics to the business cycle in order to examine the voluntary nature of self-employment in Argentina. These results suggest that the transition to self-employment is more common during recessions and that the likelihood of becoming self-employed increases with the length of the recession and the unemployment duration. The authors find that the majority of self-employed workers do not have employees and earn significantly less than salaried workers. Individuals in this sector are often young and less educated and have trouble obtaining a salaried position regardless of the macroeconomic conditions. Middle-aged, college-educated individuals also tend to enter self-employment as a temporary refuge when they encounter difficulties during a recession.