Abstract

The interrelationship between self-employment and unemployment has been the topic of many scientific investigations. The relation is of considerable policy importance as self-employment is seen as a route to escape unemployment. The relation is quite complex however as there are two directions of causality involved. On the one hand self-employment may lead to a decrease in unemployment (we label this the “entrepreneurial” effect), and on the other hand unemployment may lead to an increase in self-employment (“refugee” effect). As these two effects are in opposite directions, it is important to disentangle these two effects in empirical work. The present paper focuses on the relation between self-employment and unemployment for Spain.

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