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 logit 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.