No. 459 - Cross-country differences in self-employment rates: the role of institutions

by Roberto Torrini
December 2002
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This paper examines the role of institutional variables in determining the large disparities observed in self-employment rates across OECD countries. Our findings suggest that a large public sector reduces the scope for independent work, while high levels of product market regulation are positively associated with the self-employment rate. In countries with high levels of perceived corruption, a high tax and social contribution wedge fosters self-employment, probably because independent work makes it easier to evade tax and social contribution. Cross-country, time-series data show that taxation has an opposite impact in the other countries. The case of Italy, which stands out among developed countries for its large self-employment rate, is analysed in some detail in the concluding section, providing examples of the importance of the identified institutional variables in fostering self-employment.

Published in 2005 in: Labour Economics, V. 12, 5, pp. 661-683

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    No. 459 - Cross-country differences in self-employment rates: the role of institutions
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