Wage Employment, Unemployment and Self-Employment across Countries

Arbeitspapier

Poor countries have low wage employment and high self-employment. This paper shows that they also have high unemployment relative to wage employment, and that self-employment increases with this ratio. To understand the sources of these patterns, I build a search and matching model with choice between job search and self-employment and with learning about matches, and calibrate it to match all transition rates between wage employment, unemployment and self-employment as well as separation hazards by job duration, separately for all 37 countries with available data. Quantitative analysis of the model shows that labor market frictions affect self-employment as much as unemployment. Labor market frictions also reduce aggregate output, not only by raising unemployment, but also by worsening the average quality of both wage employment matches and active self-employment projects.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 16271

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Analyses of Economic Development ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Unemployment: Models, Duration, Incidence, and Job Search ; Entrepreneurship
• Subject: wage employment ; unemployment ; self-employment ; labor market frictions ; occupational choice ; productivity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Poschke, Markus
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/278969
• Last update: 10.03.2025, 11:44 AM CET