The relationship between self-employment and unemployment in the long-run: A panel cointegration approach allowing for breaks

Purpose – Although a lot of research has been done on the link between self-employment and unemployment, often focusing on the short-run of the relationship, the long-run association between the two variables has not received adequate attention. The paper aims to discuss these issues. Design/methodology/approach – In this paper the authors examine the long-run relationship between self-employment and unemployment using panel cointegration methods allowing for structural breaks and covering a wide range of European OECD countries using the COMPENDIA data set over the period 1990-2011. Findings – The findings indicate that a long-run relationship between self-employment and unemployment exist in the panel, but the cointegrating coefficients are unstable. Originality/value – The estimates finds positive and statistically significant long-run association between self-employment and unemployment exists for more than 50 per cent of the countries included in the sample after the break. For the rest of the countries the authors find either negative or statistically insignificant association.