The Dynamics of Solo Self-Employment: Persistence and Transition to Employership

Abstract

This study examines dynamics of solo self-employment. In particular, we investigate the extent of true state dependence and cross state dependence, i.e., whether experiencing solo self-employment causally affects the probability of becoming an employer in the future. We use data from the German Socio-Economic Panel to estimate dynamic multinomial logit models. Our results show that the extent of true (cross) state dependence is rather small. The observed persistence in solo self-employment as well as transitions from solo self-employment to employership can largely be explained by observed and unobserved heterogeneity.

Keywords: state dependence, dynamic multinomial logit, solo self-employment, own-account worker, stepping stone, German SOEP

JEL Classification: J23, J62