Do the unemployed become successful entrepreneurs?

Many unemployed people become self‐employed. Self‐employment, however, does not necessarily lead to success. The main objective of the paper is to compare the economic outcome and success as self‐employed between those who entered self‐employment from paid employment, unemployment and inactivity. The question is if individuals who enter self‐employment from a weak position on the labour market are equally successful as those who enter self‐employment from a stronger position.

Micro‐econometric methods are used to estimate first the propensity to become self‐employed in the period 1998‐2002 among Swedish‐born men aged 20‐60 years who were unemployed, inactive or wage earners in 1998, and second, the economic outcome of self‐employment. Economic outcome in 2002 is measured using income from self‐employment and having employees in the firm.

The study finds that the unemployed, and even more the inactive, are overrepresented among those who become self‐employed. Those who were wage earners in 1998 have higher incomes and are also employing other people in their business to a much higher extent in 2002 than those who were unemployed or inactive in 1998.

The results indicate that support for unemployed to become self‐employed should be implemented with great care. The economic outcome of self‐employment is inadequate for many who were unemployed earlier.

The study will be valuable for those who are interested in those who become self‐employed and in the economic outcome of self‐employment for different groups.