Who Makes the Transition from Unemployment to Self-Employment?*

This paper analyses the labour market transitions of unemployed individuals. We are particularly interested in why some individuals become self-employed instead of wage or salary earners upon returning to employment. Using Finnish microdata and a multinomial logit model we find that when we compare unemployed individuals ́ probability of moving into a wage or salary work with the probability of moving self-employment, we find that married individuals, individuals with longer unemployment spells, individuals with more self-employment experience, and individuals with more wealth are more likely to become self-employed instead of taking a wage or salary job upon becoming reemployed. JEL classifications: J23, J64, G32