Regional Differences in Self-Employment: Evidence from Croatia
Ekonomska Istrazivanja-Economic Research
The transition in most countries was accompanied by the burst of unemployment. At the beginning of transition, the new opportunities to start own businesses were expected to release the entrepreneurship potential of the population and lead to fast convergence towards the successful market economies. At the same time, entrepreneurship was expected to alleviate the labour shedding from restructured ine¢ cient industrial sector. The data seldom corroborates this successful transition scenario.
... ition scenario. This paper provides analysis of the regional di¤ erences in self-employment in Croatia during the mature transition 1998-2008 period. Although self-employment cannot be equalized with entrepreneurship, Labour Force Survey as relatively rich data source enables investigation of certain factors that might be partially related to the overall entrepreneurship propensity of the working population in Croatia. Furthermore, analysis of potential regional di¤ erences in Croatian labour force entrepreneurship propensity has not been previously quantitatively assessed in the literature. The regional perspective in the paper is used to investigate whether there is a link between the evolution of self-employment and overall unemployment rate in the region (does self-employment help to alleviate unemployment problems?), the share of public sector employment (do chances of ...nding a secure government job impede entrepreneurship?), economic structure of the region (which economic sectors are more likely to encourage self-employment?) through time. In addition, the characteristics of the self-employed -in terms of gender, age, occupation, education, wage, household characteristics -are compared to those in employment. With this segment of the analysis we try to reveal whether there is higher entrepreneurship propensity within certain population subgroups in Croatia. re ‡ection upon that period shows that although many new businesses opened at the beginning of the transition, many subsequently failed. The notion that self-employment could alleviate the unemployment problems was also incorporated in the Croatian national employment policies, starting from year 1998, and staying, although modi...ed, within the employment promotion policies throughout the period (Croatian Employment Service, 2010). However, even early evidence has shown that the measures did not encourage a large share of unemployed into self-employment (Babić, 2003). The most probable reason behind this relative unsuccessfulness of the measure is that starting your own business requires the ...nancial means as well as speci...c skills, which the unemployment population for the most part lacks 1 . A detailed analysis of the overall structure of the self-employed is provided by Matković (2009), who presents the evolution of the self-employment share in Croatia during the 1996-2006 period, based on Labour Force Survey (LFS) data conducted by the Central Bureau of Statistics (CBS). He emphasizes that half of the self-employment population comprises of agricultural workers, mostly older population living in rural areas, with small income and low education. He also identi...es other types of self-employed, thereby indicating that self-employment is highly heterogeneous in Croatia. The aim of this paper is not to exhaustively explore the self-employment phenomenon in Croatia, nor to explore certain speci...cities of the phenomenon in detail. The main goal of the paper is to analyze regional di¤erences in selfemployment and to discuss the possible determinants of such di¤erences. Since regional aspect was not previously discussed in the Croatian literature, this is the main contribution of the paper. The structure of the paper is as follows. The next section presents the preliminary analysis of the data and discusses the quality of the data sources used for the analysis. Section 3 presents the results of the empirical analysis of the di¤erences in county self-employment shares. Section 4 presents the results of 1 The relative importance of ...nancial constraints for starting a business is emphasized in the literature. See, for instance, Evans and Jovanovic (1989) , Bates (1995) , and for Croatia relatively new results of on line survey Moj posao (2010).