Self-employment as a vehicle for labour market integration of immigrants and natives: The role of employment protection legislation
Abstract
Purpose
The purpose of this paper is to investigate the effect of employment protection legislation (EPL) on self-employment in a comparative analysis between immigrants and natives. Specifically, it investigates whether, as a result of more stringent regulations, self-employment becomes a vehicle for better labour market integration for immigrants and natives, and for better matching between the supply and demand of labour and skills.
Design/methodology/approach
The authors use OECD indicators on the strictness of EPL, self-employment rates calculated for natives and immigrants from the EU Labour Force Survey and a range of control variables, in a longitudinal study covering 18 European countries over the period 1995–2013. The analysis employs a panel regression with random effects as the baseline model, with country and time fixed effects models serving for robustness checks.
Findings
The results indicate that EPL of regular contracts affects native self-employment positively, with some evidence of a negative effect for immigrants. On the other hand, EPL of temporary contracts positively affects immigrants’ self-employment. These results indicate that a stricter EPL crowds out incumbent native workers from the prime employment segment of regular contracts into self-employment, whereas a similar effect exists for immigrant workers in the segment of temporary contracts. This is consistent with the hypothesis of segmentation of labour market opportunities between insiders and outsiders, with implications for immigration, employment and entrepreneurship policies.
Originality/value
This is the first study to systematically study the effect of EPL on immigrant and native self-employment in a comparative framework. It elucidates to what extent self-employment serves as an alternative channel of labour market integration in response to less and more strict regulation of regular and temporary employment contracts. Distinguishing immigrant and native workers helps us understand how these effects may differ for outsiders and insiders in the labour market, as represented by the two groups.
Keywords
Acknowledgements
The authors are grateful to the EDUWORKS faculty and fellows, the participants of the Annual Doctoral School Conference at Central European University, as well as two anonymous referees for feedback and useful discussions that have helped to improve this manuscript significantly. The authors acknowledge the financial support of the EDUWORKS Marie Curie Initial Training Network Project (PITN-GA-2013-608311) of the European Commission’s 7th Framework Programme. Martin Kahanec gratefully acknowledges grant APVV-15-0765: inequality and economic growth. All remaining errors are the authors’ own.
Citation
Ulceluse, M. and Kahanec, M. (2018), "Self-employment as a vehicle for labour market integration of immigrants and natives: The role of employment protection legislation", International Journal of Manpower, Vol. 39 No. 8, pp. 1064-1079. https://doi.org/10.1108/IJM-10-2018-0332
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited