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SERC/Urban and Spatial Programme Discussion Paper
Does Self-Employment Measure Entrepreneurship? Evidence from Great Britain
Giulia Faggio and Olmo Silva
May 2012
Paper No' SERCDP0109:
Full Paper (pdf)

JEL Classification: L26; J21; R12; R23

Tags: entrepreneurship; self-employment; spatial distribution

Research on entrepreneurship often uses information on self-employment to proxy for business creation and innovative behaviour. However, little evidence has been collected on the link between these measures. In this paper, we use data from the UK Labour Force Survey (LFS) combined with data from the Business Structure Database (BSD), and the Community Innovation Survey (CIS) to study the relation between self-employment, business creation and innovation. In order to do so, we aggregate individual and firm-level data at the Travel-to-Work Area (TTWA) and investigate how the incidence of self-employment correlates with the density of business start-ups and innovative firms. Our results show that in urban areas a higher incidence of self-employment positively and strongly correlates with more business creation and innovation, but this is not true for rural areas. Further analysis suggests that this urban/rural divide is related to lack of employment opportunities in rural areas, which might push some workers into self-employment as a last resort option.

This paper has been published as:
Self-Employment and Entrepreneurship in Urban and Rural Labour Markets, Giulia Faggio and Olmo Silva, Journal of Urban Economics, Volume 83, Issue 1, November 2014