Foundations and Trends® in Entrepreneurship > Vol 3 > Issue 4

Entrepreneurship in the UK

By David G. Blanchflower, Bruce V. Rauner Professor of Economics, Dartmouth College, University of Stirling, NBER, IZA and Member of the Monetary Policy Committee, Bank of England, | Chris Shadforth, External Monetary Policy Committee Unit, Bank of England,

Suggested Citation
David G. Blanchflower and Chris Shadforth (2007), "Entrepreneurship in the UK", Foundations and TrendsĀ® in Entrepreneurship: Vol. 3: No. 4, pp 257-364.

Publication Date: 15 Jul 2007
© 2007 D. G. Blanchflower and C. Shadforth
Government programs and public policy
Self-employmentLabour Force SurveyTimes series

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In this article:
1 Introduction 
2 Time Series Trends 
3 Self-Employment and Earnings 
4 Who are the Self-Employed? 
5 Econometric Analysis of the Probability of a Randomly Selected Worker being Self-Employed 
6 Liquidity Constraints 
7 Discussion and Conclusions 


This paper examines the causes and consequences of changes in the incidence of entrepreneurship in the UK. Self-employment as a proportion of total employment is high by international standards in the UK, but the share has fluctuated over time. We examine the time series movements in self-employment, which are principally driven by financial liberalization and changes in taxation rules, especially as they relate to the construction sector which is the dominant sector. We document that the median earnings of the self-employed is less than for employees. We show that in comparison with employees the self-employed are more likely to be males; immigrants; work in construction or financial activities; hold an apprenticeship; work in London; work long hours; have high levels of job satisfaction and happiness. Consistent with the existence of capital constraints on potential and actual entrepreneurs, the estimates imply that the probability of self-employment depends positively upon whether the individual ever received an inheritance or gift. Evidence is also found that rising house prices have increased the self-employment rate. There appears to be no evidence that changes in self-employment are correlated with changes in real GDP, nor national happiness.

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Table of contents:
Time Series Trends
Self-Employment and Earnings
Who are the Self-Employed?
Econometric Analysis of the Probability of a Randomly Selected Worker Being Self-Employed
Liquidity Constraints
Discussion and Conclusions

Entrepreneurship in the UK

Entrepreneurship in the UK examines the causes and consequences of changes in the incidence of entrepreneurship in the United Kingdom by focusing on the characteristics of the self-employed and how self-employment has changed over time. Entrepreneurship in the UK is comprehensive and complete in its review of: time series trends in self-employment in the UK and elsewhere; the earnings of the self-employed with those of wage and salary workers; the characteristics of the self-employed; econometric analyses of the determinants of self-employment and comparisons with US + EU; the importance of liquidity constraints and the role of inheritances and gifts and rising house prices in overcoming credit constraints; macro-economic consequences and correlates of self-employment. Entrepreneurship in the UK identifies the characteristics of the self-employed and explains how and why their numbers have changed over time.