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

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. Using data from the German Socio-Economic Panel, we apply dynamic multinomial logit models and find that the extent of true 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 characteristics.