Miguel Torres Preto

The dynamics of causality between entrepreneurship and unemployment

This paper examines the dynamic interrelationship between different measures of entrepreneurship ? business-ownership rates and entry rates ? and unemployment rates for Portugal over the period 1983?2000. On the one hand, unemployment rates may stimulate start-up activity of self-employment. On the other hand, higher start-up rates, or higher self-employment, may facilitate industrial restructuring and renewal, decreasing unemployment in subsequent periods. The overlap between these two effects results in ambiguity about the interrelationship between unemployment and entrepreneurial activity. This paper uses a two-equation Vector Autoregression (VAR) model capable of reconciling these ambiguities and tests it with data from 30 Portuguese regions. The empirical results confirm that the relationship between unemployment and entrepreneurship is ambiguous, regardless of the specific measure used to account for increases in entrepreneurial activity.

Entrepreneurial Skills and Workers' Wages in Small Firms

This paper contributes to the understanding of how small firms are organized and managed. It tests an entrepreneur-worker matching model in small entrepreneurial firms. The model contemplates the existence of complementarities between workers’ and entrepreneur’s skills. Using a Portuguese longitudinal matched employer–employee dataset for the period 1995–2003, the empirical analysis provides descriptive results consistent with the matching model: skill stratification—entrepreneurs are more skilled than workers; scale effects—more skilled entrepreneurs run larger firms, though limited by the restriction on firm size; and positive sorting—more skilled entrepreneurs matched with more skilled workers. The estimation of wage regressions shows that the higher the level of education and experience of the entrepreneur, the higher the wage premium for workers. Results suggest that workers’ wages reflect the value of the match with entrepreneur’s skills. Thus, entrepreneurial skills have an impact not only on job creation, but also on the quality of jobs created.

Long-term effects of new firm formation by type of start-up

We examine the regional effects of new business formation on subsequent employment growth, observing in particular the effects of different kinds of start-ups on employment change, and the lag structure of these effects. We differentiate new firms according to three criteria: 1) size; 2) presence of foreign capital; 3) incorporation of knowledge/technology. In all cases, results suggest that effects on new firm formation on subsequent employment change are significantly different according to the type of start-up. Start-ups that are larger, foreign-owned, and knowledge-based have considerably stronger effects on industrial re-structuring and employment change, whether due to market selection processes or supply-side spillovers. The results therefore suggest that recognising the types of entrants that generate greater impacts on employment growth is of foremost importance for the design of public policies towards entrepreneurship.

The Dynamics of Causality between Entrepreneurship and Employment

This paper examines the dynamic inter-relationship between different measures of entrepreneurship - business ownership rates and entry rates - and unemployment rates for Portugal over the period 1983-2000. On the one hand, unemployment rates may stimulate start-up activity of self-employment. On the other hand, higher start-up rates, or higher self-employment, may facilitate industrial re-structuring and renewal, decreasing unemployment in subsequent periods. The overlap between this two effects results in considerable ambiguity about the interrelationship between unemployment and entrepreneurial activity. This paper uses a two-equation vector auto-regression model capable of reconciling these ambiguities and tests it for data from 30 Portuguese regions. The empirical results confirm that the relationship between unemployment and entrepreneurship is ambiguous, regardless of the specific measure used to account for increases in entrepreneurial activity.

Foreign divestment: What stays when multinationals leave?

When an MNE closes its doors, workers may find themselves in demand or struggling, depending on the nature of their employment and the characteristics of the foreign affiliate itself. The authors recommend a targeted policy approach that focuses on transition assistance for the most vulnerable employees.