Dependent Self-Employment as a Way to Evade Employment Protection Legislation

Small Business Economics, Forthcoming

Posted: 2 Apr 2009 Last revised: 13 Oct 2010

See all articles by Concepción Román

Concepción Román

University of Huelva

Emilio Congregado

University of Huelva

José María Millán

University of Huelva

Date Written: November 12, 2009

Abstract

This paper examines whether the strictness of employment protection legislation encourages employers to contract out work to their own paid employees by the formula of dependent self-employment, while makes transitions to independent self-employment less likely by altering the relative valuation of risk between salaried-work and self-employment in favour of the former. In conducting this analysis, discrete choice models are applied to data drawn from the European Community Household Panel from 1994 to 2001. To test our hypotheses, we include a tentative individual measure of the potential severance payment that a worker would receive in the case of dismissal, as well as aggregated variables that try to capture differences in labour market institutions and macroeconomic conditions. We find evidence for a positive impact of the strictness of employment protection legislation and the potential severance payment on transitions to dependent self-employment. The opposite effects, however, are detected for individuals becoming independent self-employed.

Keywords: Entrepreneurship, self-employment, dependency, contracting out, occupational choice, labour market institutions.

JEL Classification: J24, J38, J65, K31, L24, L26

Suggested Citation

Román, Concepción and Congregado, Emilio and Millan, Jose Maria, Dependent Self-Employment as a Way to Evade Employment Protection Legislation (November 12, 2009). Small Business Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1371466

Concepción Román (Contact Author)

University of Huelva ( email )

Plaza de la Merced 11
Huelva, Huelva 21071
Spain
+34959217886 (Phone)

Emilio Congregado

University of Huelva ( email )

Departament of Economics
Plaza de la Merced, 11
Huelva, Huelva 21002
Spain

HOME PAGE: http://www.uhu.es/emilio.congregado

Jose Maria Millan

University of Huelva ( email )

Plaza de la Merced 11
Huelva, Huelva 21071
Spain
+34959217886 (Phone)

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