The labour market and tax policy drivers of self-employment: New evidence from Europe

Abstract

Using cross-country time series panel regressions for 1995-2022, this article seeks to identify the main labour market and tax policies affecting self-employment in European OECD countries. It uncovers heterogeneous policy impacts for different forms of self-employment and considers how the share of self-employment correlates with changes in policies along dimensions including sex, age and skills. Minimum wages and employment protection legislation appear to be robustly associated with changes in the long-term share of own-account self-employment, whereas the share of self-employment with employees appears to coincide with changes in the tax wedge and unemployment benefits. Deindustrialization is found to be positively correlated with self-employment, which exhibits some cyclical properties.