THE EVOLUTION OF UK SELF-EMPLOYMENT - A STUDY OF GOVERNMENT POLICY AND THE ROLE OF THE MACROECONOMY

This paper reports the findings of a time series analysis exploring th e fundamental determinants of the substantial rise in U.K. self-employ ment over the period 1972-92. The key findings are that the self-emplo yed/wage-employed income differential has a high and positive effect u pon the proportion of the workforce in self-employment, supporting alt ernative wage theories of labour market status, as does housing wealth , supporting credit-rationing theories. Perhaps the most interesting f eature concerns the relationship between unemployment and self-employm ent. On this we find that it is the duration structure of unemployment that matters, not simply the stock of unemployed people. This evidenc e may imply that self-employment is a last resort for certain individu als marginalized in the employed sector and facing lengthy spells of u nemployment.