Self-employment and entrepreneurship in urban and rural labour markets

Faggio, G. & Silva, O. (2014). Self-employment and entrepreneurship in urban and rural labour markets. Journal of Urban Economics, 84, pp. 67-85. doi: 10.1016/j.jue.2014.09.001

Abstract

We study the link between self-employment and some salient aspects of entrepreneurship - namely business creation and innovation - in urban and rural labour markets. In order to do so, we combine individual and firm-level data for Britain aggregated at the Travel-to-Work Area level. We find that a higher incidence of self-employment positively and strongly correlates with business creation and innovation in urban areas, but not in rural areas. We also document that more rural than urban workers become self-employed in areas with comparably poor labour market opportunities, although this heterogeneity is not evident when focussing on entrepreneurship. Finally, we show that the misalignment between self-employment and our proxies for entrepreneurship in rural areas disappears once we account for local labour market conditions. Our results suggest that self-employment, business creation and innovation are well lined-up in urban areas because they capture the same economic phenomenon - namely, genuine entrepreneurship. This is not the case for rural areas.

Publication Type:	Article
Publisher Keywords:	Entrepreneurship; Self-employment; Spatial distribution
Subjects:	H Social Sciences > HB Economic Theory
Departments:	School of Policy & Global Affairs > Economics