Self-employment and unemployment relationship in Romania - Insights by age, education and gender

Abstract

We check on the short term if self-employment in Romania influences unemployment and vice versa. Age, education and gender characteristics treat both variables, and self-employment considers both cases with and without employees. The objective is to look at the job creation and unemployment reduction in quarterly variation during the 1999Q1-2017Q3 period. On autoregressive models, we apply the Toda and Yamamoto (1995) procedure, detailed by Giles (2011), to assess for Granger Causality. We found for unemployment rates a push effect in the self-employment rate for adults and youth with low education level to self-employment without employees' rate for adults and self-employment with employees' rate for old adults. We establish a 'Schumpeter' effect for the adult with a low level of education self-employment to unemployment, for adults' males with tertiary education and self-employed, and older adults self-employed without employees to unemployment. We conclude that unemployment work as an inclusion mechanism for some vulnerable groups but inefficient for others. Self-employment with employees is less diversified, indicating a high-risk aversion and low start-up effect. In general, the labour market presents a unidirectional flexibility effect.