Transitions to and from self-employment in Spain: An empirical analysis

This paper investigates the influence of individual characteristics and the business cycle on the probability of entry into self-employment and on self-employment duration. We estimate multinomial legit and discrete competing risks models using data from a longitudinal sample of Spanish men for the period 1985-1991. The results indicate that unemployment raises the probability of entering self-employment, but also increases the hazard of leaving self-employment, especially into unemployment. Moreover, receiving unemployment benefits significantly reduces the probability of entering self-employment. Liquidity constraints are important in determining enterpreneurial selection, but only for those who become self-employed with employees.