مالیات، شرایط اقتصادی و روندهای اخیر در مردان خود اشتغال: مقایسه کانادا و آمریکا

North American workers have increasingly turned to self-employment since the 1970s. Using microdata for the period 1983–1994 from Canada and the United States, I assess the importance of macroeconomic conditions and the tax environment in explaining the trends in male self-employment in these two countries. My findings suggest that higher income tax and unemployment rates are associated with an increase in the rates of self-employment among North American men. Changes in the tax environment account for a considerable amount of the secular trends in male self-employment over this period, while changing economic conditions played a smaller role in determining these trends.

The resurgence of self-employment in the United States has recently attracted the attention of a number of researchers (e.g., Blau, 1987, Evans and Leighton, 1989 and Devine, 1993). Attempts to explain this phenomenon have however met with only limited success, for a number of reasons. First, standard shift-share analyses tend to show that the factors most commonly invoked to explain this trend — industrial restructuring, and shifts in the demographic composition of the workforce — typically can account for only a small fraction of the observed changes. Second, another commonly invoked explanation — changes in technology — remains very difficult to test, and in practice is often simply treated as a label attached to otherwise unattributable changes. Finally, although this is not typically noted in the literature, there is a third reason to be skeptical of structural and technological explanations of rising self-employment: recent trends in self-employment rates are far from uniform across developed countries (OECD, 1992). Indeed, with declines almost as common as increases across OECD countries, international statistics strongly suggest that country- or region-specific factors, rather than widely shared trends like cheaper computing power, feminization of the labor force, or the move to a service economy, may play central roles in the evolution of self-employment rates. The goal of this paper is to examine the role of two less commonly analyzed factors which do vary across regions and countries–macroeconomic conditions and the income tax environment — in explaining recent self-employment trends. Macroeconomic conditions have often been cited as a potential contributor to self-employment, especially to the extent that self-employment is used by some individuals as a “job” of last resort in poor labor markets Quinn, 1980, Becker, 1984 and Bishop, 1987. Tax policy, and especially the rate of personal income tax, have also been cited (e.g., Long, 1982, Blau, 1987 and Devine and Mlakar, 1993) as possible determinants of self-employment rates, largely because self-employment offers individuals greater opportunity to shelter, or hide, income from tax authorities, an option which is especially valuable in high-tax jurisdictions. Clearly, if macroeconomic conditions and tax policy, rather than fundamental technological change, are driving recent increases in self-employment in some countries, policy prescriptions may differ. Because of their focus on data from a single country and, in some cases their lack of regional disaggregation, previous authors have been limited in their ability to isolate the importance of tax and macroeconomic factors: essentially they are restricted to using a single time series of tax and macroeconomic variables. In the current paper, I address this problem in two ways. First, I use 10 years of microdata covering the 12-year period 1983–19941 from two countries, Canada and the US, which are perhaps more similar in overall institutional structure than any other two countries, but which differ substantially in their income tax policy, macroeconomic conditions, and self-employment trends. Second, I disaggregate each country's labor markets and tax jurisdictions to the state/province level, allowing me to use asynchronous variation in these conditions across these 60 provinces and states as a source of identification. In effect, my analysis operates on a pooled sample of all employed individuals in two countries over 12 years, assessing the importance of the total tax and macroeconomic environment of their province or state as a determinant of self-employment trends. My focus in this paper is on self-employment among males aged 25–64; unlike women, men were not affected by a massive secular rise in wages, experience and overall labor force participation rates which could obscure the effects of the tax and macroeconomic factors that are the subject of this paper. Men in this age group are also less affected by secular increases in school attendance, a trend which plays an important role for other age groups. My main findings are as follows. First, perhaps surprisingly, non-primary self-employment rates (hereafter simply referred to as self-employment rates) for males aged 25–64 were higher in Canada than the US during the period 1983–1994, which is the focus of my analysis.2 Second, while much has been made of an earlier increase in US male self-employment, and of the continuing increase in female self-employment, the self-employment rate of prime-age males actually fell over the period covered by my data, from 13.9% in 1983 to 12.4% in 1994. Third, in contrast, Canada experienced an increase in male self-employment over this period, from 16.3% to 18.5% of the employed labor force. While certainly not conclusive, these trends and levels are strongly suggestive of both macroeconomic and tax explanations, because Canada had increasing income tax rates and a deteriorating macroeconomic environment relative to the US over this period. Fourth, in a regression context that controls for province/state effects and industry specific time trends, I find that increases in average income tax rates have large and positive effects on the rate of male self-employment, as expected. This effect is larger using average tax rates at higher points in the income distribution, as well as for individuals with higher education levels and among those in industries characterized by “informal suppliers,” who should be more affected by these tax rates. Overall, the estimated impact of a 30% increase in taxes is a corresponding rise in the rate of male self-employment of between 0.9 and 2 percentage points in Canada and between 0.8 and 1.4 percentage points in the US, over 1994 levels. This implies that under-reporting of self-employment income is one of the motivating factors for becoming self-employed. In fact, a decomposition demonstrates that changes in the average tax rates are the largest contributing factor, of the determinants examined, for the secular trends in male self-employment in North America. Finally, increases in the provincial/state unemployment rates appear to also be associated with a rise in the rate of male self-employment. However, estimates of the elasticity of self-employment with respect to the unemployment rate are considerably smaller than those associated with the tax rates. For instance, a 30% rise in the rate of unemployment in Canada (3 percentage points) would result in a 0.6 percentage point increase in the rate of self-employment using 1994 figures. While one might not expect these “macroeconomic” effects to play a large role in explaining secular changes in self-employment rates, I find that, because of the widening Canada–US unemployment rate gap over the period examined here, they do play some role in explaining the widening Canada–US gap in self-employment. However, this role is much smaller than that attributed by my model to the tax policy variables. The remainder of this paper is organized as follows: Section 2 summarizes recent international trends in self-employment rates, and Section 3 reviews previous explanations of trends in self-employment. The data are described in Section 4. Section 5 describes the characteristics of self-employed males and the aggregate trends in male self-employment rates, tax liabilities and unemployment rates. In Section 6 I describe and analyze the results of various regression specifications. Section 7 presents the results of a simple decomposition of the predicted male self-employment rates between 1983 and 1992 and Section 8 concludes.

The literature on self-employment to this point has primarily focused on factors that have global effects for most developed economies. However, the evidence suggests that no single common factor is responsible for the trends. For this reason, this paper has focused on region-specific factors — namely the tax environment and economic conditions — as possible causes for the trends in male self-employment in North America. This examination improves upon previous studies which have examined the effects of taxes and economic conditions on self-employment by incorporating province or state as well as cross-country variation in the tax and unemployment data. The results presented here provide evidence that changes in the tax environment explain a considerable amount of the secular trends in male self-employment in North America while economic conditions explain less of these trends. The empirical analysis shows that even with fairly strict controls for industry characteristics, increases in average income tax rates have positive and large effects on the rate of male self-employment. The estimated effect of increasing taxes by 30% is an increase in the rate of male self-employment in incorporated and unincorporated businesses of between 4.8% and 11.1%. This suggests that one of the motivations for becoming self-employed is the relative tax advantages associated with self-employment. In fact, the decompositions demonstrate that changes in average tax rates are the largest contributing factor of the possible determinants examined here for the secular trends in self-employment in Canada and the US. While previous studies by Blau (1987) and Devine and Mlakar (1993) reported some evidence of a positive relationship between tax rates and self-employment the findings were not convincing because of conflicting results. In addition, these studies did not attempt to quantify the importance of taxes as an explanation for the trends in self-employment. Indeed, by examining the effect of the tax environment on self-employment across variously defined groups of self-employed males, this study has uncovered some of the more salient features of this relationship. The finding that the probability of self-employed in a secondary job is less responsive to increases in income taxes than the same probability in a main job implies that tax sheltering alone is not enough of an incentive to lure some North American males into self-employment. Instead, for some it is the relative ease of under-reporting income in self-employment that is the factor determining self-employment status among these males. The results also support the notion that North American males turn to self-employment to some extent during spells of high unemployment. This result adds new evidence to the debate in the literature on whether or not individuals are being “pushed” into self-employment. It could be that individuals experiencing unemployment find this transition to be a convenient time to become self-employed or that self-employment is simply employment of last resort. It appears, however, that economic conditions had a smaller role in determining self-employment among these males than the tax environment did. Further, the unemployment rates did not explain much in terms of the secular trends in self-employment in Canada and the US over this period, as was illustrated by the decompositions. A number of policy implications arise from these findings. First, raising income taxes may result in increased numbers of workers moving into the self-employment sector where their labor income can be taxed at a lower rate. This will leave fewer tax paying workers which, in turn, may require greater-than-expected increases in income taxes. Second, the fact that self-employment appears to provide employment during downturns suggests that policies that provide assistance to fledgling entrepreneurs may assist in alleviating the particularly harmful negative employment effects of recessions. Not surprisingly, however, this policy prescription should be regarded as highly tentative for a number of reasons. First, it is not clear from this analysis whether or not this finding is a result of an increase in the actual number of self-employed individuals. It could be that jobs in the self-employment sector are simply more insulated against demand shocks than wage and salary jobs. Therefore, in recessions the rate of self-employment may rise because the number self-employed holds constant while the total number of individuals employed falls. Second, supposing that new jobs are created in the self-employment sector during recessions, we are unable to discern from this analysis how stable these newly created self-employment jobs actually are. These jobs could be temporary and, therefore, not worthy of assistance. It seems that an analysis that includes a longitudinal component would be effective in providing answers to these questions. In any case, further analysis is required to sort these issues out.