The sustainability of start-up firms among formerly wage-employed workers

Abstract

In this paper we study the survival of start-up firms among former wage workers in Spain. We use well-known duration model techniques in order to analyse the duration of their self-employment spells distinguishing between those that end in unemployment from those that end in exit to a new paid employment. We address the question of how long these workers remain self-employed before entering into unemployment or returning to paid employment. Our findings show that a higher survival rate in self-employment is associated with men, prime-age workers and individuals with higher previous labour turnover. Moreover, longer unemployment spells are found to speed up the rate of transition to unemployment and to reduce that to paid employment. Finally, the probability of exiting decreases with duration in self-employment, and women are more likely than men to become unemployed after a self-employment experience.