The Economics of Self-Employment and Entrepreneurship

by Simon C. Parker

• ISBN13: 9780521030632
• ISBN10: 0521030633
• Format: Paperback
• Copyright: 2006-07-31
• Publisher: Cambridge University Press

Summary

As self-employment and entrepreneurship become increasingly important in our modern economies, Simon Parker provides a timely and comprehensive overview of the field. Bringing together considerable disparate literature, Parker offers an up-to-date assessment of new research findings. Key issues addressed include raising finance; job creation by the self-employed; growth and exit behavior of new ventures; and the role of government policy in promoting self-employment and entrepreneurship. This book will serve as an essential reference guide to researchers, students and teachers of entrepreneurship.

Table of Contents

List of Figures	xi
List of Tables	xii
Preface	xiii
Glossary of commonly used symbols	xv
1 Introduction	1	(36)
1.1 Aims, motivation and scope of the book	2	(1)
1.2 Structure of the book	3	(2)
1.3 Definition and measurement issues	5	(3)
1.4 International evidence on self-employment rates and trends	8	(6)
1.4.1 The OECD countries	9	(3)
1.4.2 The transition economies of eastern Europe	12	(1)
1.4.3 Developing countries	12	(2)
1.5 Self-employment incomes and income inequality	14	(10)
1.5.1 Incomes and relative incomes	14	(4)
1.5.2 Income inequality	18	(2)
1.5.3 Earnings functions	20	(4)
1.6 Some useful econometric models	24	(7)
1.6.1 Occupational choice and probit/logit models	24	(2)
1.6.2 The structural probit model	26	(1)
1.6.3 Extensions to cross-section models of occupational choice	27	(2)
1.6.4 Issues arising from the use of time-series and panel data	29	(2)
Notes	31	(6)
I Entrepreneurship: theories, characteristics and evidence	37	(98)
2 Theories of entrepreneurship	39	(29)
2.1 'Early' views about entrepreneurship	39	(4)
2.2 'Modern' economic theories	43	(21)
2.2.1 Introduction and some definitions	43	(3)
2.2.2 Homogeneous individuals	46	(8)
2.2.3 Heterogeneous entrepreneurial ability	54	(7)
2.2.4 Heterogeneous risk aversion	61	(3)
2.3 Conclusion	64	(1)
Notes	65	(3)
3 Characteristics of entrepreneurs and the environment for entrepreneurship	68	(45)
3.1 Relative earnings, human and social capital	68	(6)
3.1.1 Earnings differentials	68	(2)
3.1.2 Human capital	70	(4)
3.1.3 Social capital	74	(1)
3.2 Personal characteristics and family circumstances	74	(12)
3.2.1 Marital status	74	(1)
3.2.2 Ill-health and disability	75	(1)
3.2.3 Psychological factors	76	(7)
3.2.4 Risk attitudes and risk	83	(1)
3.2.5 Family background	84	(2)
3.3 Entrepreneurship and macroeconomic factors	86	(20)
3.3.1 Economic development and changing industrial structure	86	(8)
3.3.2 Unemployment	94	(5)
3.3.3 Regional factors	99	(3)
3.3.4 Government policy variables	102	(4)
3.4 Conclusion	106	(1)
Notes	107	(6)
4 Ethnic minority and female entrepreneurship	113	(24)
4.1 Ethnic minority entrepreneurship	114	(10)
4.1.1 Discrimination	115	(5)
4.1.2 Positive factors	120	(3)
4.1.3 Conclusion	123	(1)
4.2 Female entrepreneurship	124	(5)
4.2.1 Explaining female self-employment rates	124	(2)
4.2.2 Female self-employed earnings	126	(3)
4.2.3 Conclusion	129	(1)
4.3 Immigration and entrepreneurship	129	(3)
Notes	132	(3)
II Financing entrepreneurial ventures	135	(56)
5 Debt finance for entrepreneurial ventures	137	(28)
5.1 Models of credit rationing and under-investment	139	(17)
5.1.1 Type I credit rationing	140	(2)
5.1.2 Type II credit rationing and under-investment	142	(8)
5.1.3 Arguments against the credit rationing hypothesis	150	(4)
5.1.4 Conclusion: evaluating the theoretical case for credit rationing	154	(2)
5.2 Over-investment	156	(2)
5.3 Multiple sources of inefficiency in the credit market	158	(1)
5.4 Conclusion	159	(1)
Notes	160	(5)
6 Other sources of finance	165	(14)
6.1 Informal sources of finance	165	(6)
6.1.1 Family finance	165	(2)
6.1.2 Micro-finance schemes	167	(2)
6.1.3 Credit co-operatives, mutual guarantee schemes and trade credit	169	(2)
6.2 Equity finance	171	(6)
6.2.1 Introduction	171	(1)
6.2.2 The scale of the equity finance market for entrepreneurs	171	(2)
6.2.3 Factors affecting the availability of equity finance for entrepreneurs	173	(1)
6.2.4 Equity rationing, funding gaps and under-investment	174	(2)
6.2.5 Policy recommendations	176	(1)
6.3 Conclusion	177	(1)
Notes	178	(1)
7 Evidence of credit rationing	179	(14)
7.1 Tests of Type I rationing	180	(3)
7.1.1 The Evans and Jovanovic (1989) model	180	(1)
7.1.2 Effects of assets on becoming or being self-employed	181	(1)
7.1.3 Effects of assets on firm survival	182	(1)
7.1.4 Effects of assets on investment decisions	183	(1)
7.2 Critique	183	(3)
7.3 Tests of Type II credit rationing	186	(3)
Notes	189	(2)
III Running and terminating an enterprise	191	(42)
8 Labour demand and supply	193	(15)
8.1 Entrepreneurs as employers	193	(4)
8.1.1 Evidence about self-employed 'job creators'	193	(1)
8.1.2 Evidence about job creation by small firms	194	(3)
8.2 Entrepreneurs as suppliers of labour	197	(9)
8.2.1 Hours of work	197	(7)
8.2.2 Retirement	204	(2)
Notes	206	(2)
9 Growth, innovation and exit	208	(25)
9.1 Jovanovic's (1982) dynamic selection model	208	(5)
9.2 Growth and innovation	213	(5)
9.2.1 Gibrat's Law and extensions	213	(2)
9.2.2 Evidence on growth rates	215	(1)
9.2.3 Innovation	216	(2)
9.3 Exit	218	(9)
9.3.1 Survival rates and their distribution	218	(2)
9.3.2 Two useful econometric models of firm survival	220	(2)
9.3.3 Determinants of entrepreneurial survival and exit	222	(5)
9.4 Conclusion	227	(2)
Notes	229	(4)
IV Government policy	233	(39)
10 Government policy: issues and evidence	235	(31)
10.1 Credit market interventions	236	(6)
10.1.1 Loan Guarantee Schemes	236	(5)
10.1.2 Other interventions	241	(1)
10.2 Taxation, subsidies and entrepreneurship: theory	242	(4)
10.3 Tax evasion and avoidance: theory	246	(3)
10.4 Taxation, tax evasion and entrepreneurship: evidence	249	(4)
10.4.1 Income under-reporting by the self-employed	249	(2)
10.4.2 Tax, tax evasion and occupational choice: econometric evidence	251	(2)
10.5 Direct government assistance and regulation	253	(7)
10.5.1 Entrepreneurship schemes targeted at the unemployed	253	(2)
10.5.2 Information-based support for start-ups	255	(2)
10.5.3 Regulation and other interventions	257	(3)
10.6 Conclusion	260	(2)
Notes	262	(4)
11 Conclusions	266	(6)
11.1 Summary	266	(2)
11.2 Implications for policy-makers	268	(3)
Note	271	(1)
References	272	(36)
Author index	308	(1)
Subject index	308