Testing the Impact of Unemployment on Self-Employment: Evidence from OECD Countries

Abstract

The impact of unemployment on self-employment is rather an ambiguous issue in economics. According to refugee effect approach, there are two counter arguments: the theory of income choice argument suggests that increased unemployment may lead to increased self-employment activities whereas the counter argument defends the view that an increase in unemployment rates may decrease the endowments of human capital and entrepreneurial talent causing a rise in unemployment rates further. The empirical evidence on this issue seems to support both hypotheses. This research presents fresh and more comprehensive evidence on this issue from 28 OECD countries using the ARDL approach to co-integration technique over the period 1986-2013. The empirical results indicate that the first hypothesis holds in the case of Belgium, Canada, Sweden and the UK whereas the second hypothesis is valid in the case of Greece, Luxembourg and Portugal. The empirical results for the remaining OECD countries did not reveal any long-run relationship between the variables in question. The empirical results are also evaluated briefly for policy recommendations.

Full text

Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
Available online at www.sciencedirect.com
1877-0428 © 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Istanbul Univeristy.
doi: 10.1016/j.sbspro.2015.06.161
ScienceDirect
World Conference on Technology, Innovation and Entrepreneurship
Testing the Impact of Unemployment on Self-Employment:
Evidence from OECD Countries
Ferda Halicioglua*, Sema Yolacb
aDepartment of Economics, Yeditepe University, Istanbul, 34755, Turkey
b
Abstract
Department of Business Administration, Istanbul University, Istanbul, 34452, Turkey
The impact of unemployment on self-employment is rather an ambiguous issue in economics. According to refugee effect
approach, there are two counter arguments: the theory of income choice argument suggests that increased unemployment may
lead to increased self-employment activities whereas the counter argument defends the view that an increase in unemployment
rates may decrease the endowments of human capital and entrepreneurial talent causing a rise in unemployment rates further. The
empirical evidence on this issue seems to support both hypotheses. This research presentsfresh and more comprehensive
evidence on this issue from 28 OECD countries using the ARDL approach to co-integration technique over the period 1986-
2013. The empirical results indicate that the first hypothesis holds in the case of Belgium, Canada, Sweden and the UK whereas
the second hypothesis is valid in the case of Greece, Luxembourg and Portugal. The empirical results for the remaining OECD
countries did not reveal any long-run relationship between the variables in question. The empirical results are also evaluated
briefly for policy recommendations.
©2015The Authors. Published by Elsevier Ltd.
Peer-review under responsibility of Istanbul University.
Keywords: Self-employment; unemployment; cointegration, OECD
* Corresponding author. Tel.:+90-216-5780741; fax:+90-216-5780797.
E-mail address: fhalicioglu@yeditepe.edu.tr
© 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Istanbul Univeristy.

11
Ferda Halicioglu and Sema Yolac / Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
1. Introduction
The relationship between self-employment and unemployment presents a lively debate in economics. The origin
of this debate is related to refugee effect which forms two conflicting hypotheses.According to the theory of income
choice,as the level of unemployment raises it is expected that self-employment startsto increase too. As far as the
counter argument is concerned, the increased level unemployment also leads to the depreciation of human capital
and skills which exacerbates the existing unemployment situation. The first argument of the refugee effect is also
known as the “unemployment push” hypothesis ZKÕFK states that high unemployment may reduce the opportunity to
gain salaried employment and thus positively affect self-employment as discussed in Glocker and Steiner (2007).
According to Audretsch et al.(2005), the second hypothesis is coined as the “unemployment pull”which suggests
that unemployed people tend to possess lower endowments of human capital and entrepreneurial talent to start and
sustain a new firm.
The empirical research on this issue seems to be rather ambiguous since the growing number of studies present
evidence for the existence of both hypotheses. The ambiguity in this issue might be related to the fact that the time
span, econometric methodology and the variables in question vary considerably as far as the studies are concerned.
The main motivation of this research is based on the fact that self-employment is regarded as one of the major
economic policy solutionsto reduce the unemployment in all countries. Thus, measuring the impact of
unemployment on self-employment should reveal valuable policy information for policy makers.
This research aims to contribute to the existing literature by providing further time series evidence on the refugee
effect from 28 OECD countries using Auto Regressive Distributed Lag (ARDL) approach to cointegration
procedure. To our existing knowledge, there exists no other study utilizing this method previously in estimation of
the refugee effect.Moreover, the data span and the extent of OECD countries in this study exceed the scope of other
studies in the same category. Thus, the empirical results should be considered as more comprehensive.However, the
primary aim of this study is to analyze empirically only the refugee effect; the econometric model is based on a
univariate function disregarding other possible factors that may have impact on the refugee effect.
This research is outlined as follows: the next section provides a brief review of theoretical and empirical studies;
section 3 outlines the econometric methodology; section 4 presents and evaluates the empirical results; and the final
section is devoted to conclusions.
2. A Brief Literature Review
The discussions between self-employment and unemployment lead the way to a growing body of empirical
studies in the literature in the last two decades. Considering the size limitations, this research focuses on selected
number of studies to provide the main discussion points of the literature. The back bone of this discussion revolves
around the concept of the refugee effect. The refugee effect originated from the simple theory of income choice
which argues that increasedunemployment will lead to an increase in start-up activity on the grounds that the
opportunity cost of starting a firm is less than being unemployed. In the same strand of this literature, a counter
argument indicates that the impact of unemployment might be detrimental on self-employment due to the fact that
unemployed people not only lose their jobs but they may be deprived of the human capital and entrepreneurial skills
which are required for new business activities. The second strand of the discussion is related to the Schumpeter
effect which indicates that new-firm start up reduces the level of unemployment. That implies that the direction of
relationship runs from self-employment to unemployment.
Different aspects of the refugee and Schumpeter effects have been discussed and evaluated theoretically and
empirically in alarge number of studies (Evans and Leighton, 1990; Alba-Ramirez, 1994;Audretsch and Thurik,
2000; Audretsch et al., 2002, 2005; Carree et al., 2002, 2007; Ritsila and Tervo, 2007; Baptista and Preto,2007;
Glocker and Steiner, 2007; Faria et al., 2010; Fairlie, 2011; Yu et al., 2014; and Aubry et al., 2015).Self-

12 Ferda Halicioglu and Sema Yolac / Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
employment is regarded as the major proxy variable for the concept of entrepreneurship and it is also viewed as the
engine of economic and social development in world economies. Thus, the problem of unemployment can be
alleviated substantially with the incentives provided for the self-employment activities. With a few exceptions, a
large number of empirical studies provide support for this view. The empirical studies on the refugee effect, by and
large, appear to be focusing on developed countries especially in OECD countries. This tendency is related to the
fact that the data availability and quality are better and more easily accessible in developed countries. However, in
recent empirical studies, the numbers of developed countries were also investigated for this issue. Another aspect of
the empirical studies is that analyses contain large number of local regions within countries in order to provide
regional disparities.
Table 1 summarizes some of the empirical studies on the refugee effect. It is crystal clear that the results should
be evaluated on the basis of the time span of the data, the empirical methodology and the countries or regions in
question. Nevertheless, Table 1 also demonstrates that the econometric methodology seems to be getting more
sophisticated as the time gets close to the current date. The econometric methodologies range from Ordinary Least
Squares (OLS) to sophisticated Panel Econometric Methods (PEM). In the recent empirical studies, the researchers
seem to be adopting more sophisticated econometric procedures and longer data time span or the number of
observations. Increased data quality and advanced econometric procedures encourage the researchers to conduct
more comprehensive analyses on the refugee effects.However, it should be emphasized again that the previous
empirical studies on the refugee effects have not utilized yet the econometric procedure of the ARDL approach to
cointegration as far as this research is concerned.
Table 1. Summary Empirical Results on Refugee Effect
Author(s) and Date Data Method Countries Refugee Effect
(+/-)
Evans and Leighton (1990) CS OLS 23 OECD +
Audretsch and Fritsch (1994) CS OLS/WLS 75 regions in Germany -
Alba-Ramirez (1994) CS OLS Spain and US +
Audretsch and Thurik (2000) CS OLS 23 OECD +
Audretsch et al. (2001) CS WLS 23 OECD +
Caree et al. (2002) CS WLS 23 OECD +
Ritsila and Tervo (2002) CS Probit Finland +
Audretsch et al. (2005) TS VAR 23 OECD +
Baptista and Preto (2007) TS VAR 30 regions in Portugal +
Carree et al. (2007) PD WLS 23 OECD +
Glocker and Steiner (2007) PD PEM Germany +
Golpe and Steel (2007) TS VAR 17 regions in Spain Mixed
Faria et al. (2009) TS VAR US, UK, Ireland, Spain Mixed
Faria et al. (2010) TS VAR 10 OECD +
Fairlie (2011) PD PEM US +
Ghavidel et al. (2011) PD SEM 7 Developing and 23 OECD Mixed
Yu et al. (2014) PD PEM US +
Aubry et al. (2015) PD PEM 22 regions in France Mixed
Notes: CS (Cross-Section), TS (Time Series), PD (Panel Data), OLS (Ordinary Least Squares), PEM (Panel Econometric Methods), SEM
(Simultaneous Equation Modelling), WLS (Weighted Least Squares), VAR (Vector Auto Regression).

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Ferda Halicioglu and Sema Yolac / Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
3. Model and Econometric Methodology
3.1 The Model
Following the literature,we form the following long-run relationship between self-employment and
unemployment rates, in double logarithmic linear form as:
ttjtj
uaas
H

10
(1)
where stj is self-employment rates and utj
t
H
unemployment rates with the subscript tindexes time period with t
=1986,…, 2013; and jindexes for the country in question, and is the classical error term.
3.2 The Econometric Methodology
Advances in econometric literature dictate that the long-run relation in Eq. (1) should incorporate the short-run
dynamic adjustment process. It is possible to achieve this aim by expressing equation (1) in an error-correction
model as suggested by Engle-Granger (1987). Then, equation (1) becomes as follows:
tjt
m
i
m
i
jitjijitjijt
ubsbbs
PJH
'' '


¦¦
,1
1
1
2
0
,,2,,10,
(2)
where
'
represents change, mi
J
is the number of lags, is the speed of adjustment parameter and
1t
H
is the one
period lagged error correction term, which is estimated from the residuals of equation (1). The Engle-Granger
method requires all variables in equation (1) are integrated of order one, I(1) and the error term is integrated order of
zero, I(0) for establishing a cointegration relationship. If some variables in equation (1) are non-stationary we may
use a new cointegration method proposed by Pesaran et al. (2001). This approach is also known as autoregressive-
distributed lag (ARDL) that combines Engle-Granger (1987) two steps into one by replacing
1t
H
in equation (2)
with its equivalent from equation (1).
1t
H
is substituted by linear combination of the lagged variables as in equation
(3).
tjtjt
n
i
n
i
jitjijitjijt
vucscucsccs '' '


¦¦
,14,13
1
1
2
0
,,2,,10,
(3)
To obtain equation (3), one has to solve equation (1) for
t
H
and lag the solution equation by one period. Then
this solution is substituted for
1t
H
in equation (2) to arrive at equation (3). Equation (3) is a representation of the
ARDL approach to cointegration.
Pesaran et al. (2001) cointegration approach, also known as bounds testing, has some methodological advantages
in comparison to other single cointegration procedures. Reasons for the ARDL are: i) endogeneity problems and
inability to test hypotheses on the estimated coefficients in the long-run associated with the Engle-Granger (1987)
method are avoided; ii) the long and short-run coefficients of the model in question are estimated simultaneously;
iii) the ARDL approach to testing for the existence of a long-run relationship between the variables in levels is
applicable irrespective of whether the underlying regressors are purely stationary I(0), purely non-stationary I(1), or
mutually cointegrated; iv) the small sample properties of the bounds testing approach are far superior to that of
multivariate cointegration, as argued in Narayan (2005). The procedure is no longer valid in presence of I(2) series.
The ARDL approach involves two steps for estimating the long run relationship. The bounds testing procedure is
based on a Wald type (F-statistics) and is the first step of the ARDL cointegration method. Accordingly, a joint

14 Ferda Halicioglu and Sema Yolac / Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
significance test that implies no cointegration under the null hypothesis, (H0
0
43
cc
:), against the alternative
hypothesis, (H1
0
43 zctoc
: at least one ) should be performed for equation (3). The F test used for this procedure
has a non-standard distribution. Thus, Pesaran et al.(2001) computed two sets of asymptotic critical values for
testing cointegration for a given significance level with and without a time trend. One set assumes that all variables
are I(0) and the other set assumes they are all I(1). If the computed F-statistic exceeds the upper bound critical value,
then the null hypothesis of no cointegration can be rejected. Conversely, if the F-statistic falls below the lower
bound critical value, the null hypothesis cannot be rejected. Lastly, if the F-statistic falls between these two sets of
critical values, the result is inconclusive.
The short-run effects between the dependent and independent variables are inferred by the size of coefficients of
the differenced variables in equation (3). The long-run effect is measured by the estimates of lagged explanatory
variables that is normalized on estimate of
3
c
.
Once a long-run relationship has been established, equation (3) is estimated using an appropriate lag selection
criterion. At the second step of the ARDL cointegration procedure, it is also possible to obtain the ARDL
representation of the error correction model. To estimate the speed with which the dependent variable adjusts to
independent variables within the bounds testing approach, following Pesaran et al. (2001) the lagged level variables
in equation (3) are replaced by ECt-1
tjt
k
i
k
i
jitjijitjijt
ECuss
PODDD
'' '


¦¦
,1
1
1
2
0
,,2,,10.
as in equation (4):
(4)
A negative and statistically significant estimation of
O
not only represent the speed of adjustment but also provides
an alternative means of supporting cointegration between the variables.
3.3 Alternative Evidence of Cointegration
It has been proven by Bahmani-Oskooee and Goswami (2003) that F-testing stage is very sensitive to the selected
lag lengths in equation (3). Therefore, the results obtained at this stage are not very conclusive. According to
Bahmani-Oskooee and Ardalani (2006),this situation can be avoided if the lagged linear combination of all
variables in equation is substituted by ECt-1 as expressed in equation (4). Equation (4) presents an alternative
evidence of co-integration by the coefficient estimate of ECt-1 . A negative and significant coefficient of ECt-1 could
also reflect cointegration among the variables. In particular, this indicates clear support for the short-run adjustment
toward long-run equilibrium as well as cointegration. Moreover, Kremers et al. (1992) and Banerjee et al. (1998)
also proved that a negative and significant ECt-1 could be used as an alternative evidence of cointegration in the case
of the Engle-Granger (1987) approach. Therefore, this study will utilize the results from error correction model to
establish the existence of cointegration alternatively if the pre-testing stage of the Pesaran et al. (2001) fails to do so.
3.4 Data
The data period for each country along with variable definitions and data sources are presented in this section. All
data comes from OECD Main Economic Indicators.
The data span is not the same for all the countries due to missing years. The countries and their annual data span
used in this study are as follows: Australia (1986-2013), Austria (1986-2013), Belgium (1986-2013), Canada (1986-
2013), Finland (1986-2013), France (1986-2013), Germany (1994-2013), Greece (1986-2013), Hungary (1993-
2013), Iceland (1986-2013), Italy (1986-2013), Japan (1986-2013), South Korea (1986-2013), Luxembourg (1986-
2013), Mexico (1991-2013), The Netherlands (1970-2004), New Zealand (1986-2013), Norway (1986-2013),
Poland (1991-2013), Portugal (1990-2013), Spain (1986-2013), Sweden (1981-2004), Switzerland (1992-2013),
Turkey (1989-2013), UK (1986-2013), and USA (1986-2013).

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Ferda Halicioglu and Sema Yolac / Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
Variables
sis the annual percentage of self-employment in total employment in natural logarithm. Source: OECD
uis the harmonized annual unemployment rate in natural logarithm. Source: OECD.
4. Empirical Results
4.1 The F-test
Equation (3) is estimated for 28 OECD countries using selected annual data over the period 1986-2013. Time
series properties of the variables are checked with alternative unit root testing procedures. The unit root results
demonstrate that all variables are in the order of integration of either I(0) or I(1). However, this stage of the
econometric results is not reported here due to space considerations. The pre testing stage of the ARDL approach to
cointegration is sensitive to the number of lags to be imposed on each differenced variable in equation (3). To avoid
this problem, an initial lag of 2 is imposed on each differenced variable to minimize the loss of degrees of freedom
since we use limited annual data. Then,
2
R
AIC (Akaike Information Criterion), SBC (Schwarz Bayesian Criterion)
or HQC (Hannan Quinn Criterion) are being employed to select the optimum number of lags. All results, therefore,
belong to optimum models. The summary results from the ARDL approach to cointegration are reported in Table 2.
In regards to F statistics, there are only three cointegration relationships namely in the case of Belgium, France and
the UK. Considering a negative and statistically significant ECt-1 is considered to be an alternative way of
supporting cointegration, Austria, Canada, Belgium, France, Greece, Luxembourg, Portugal, Spain, Sweden and the
UK fall into this category. Finally, as far as the statistically significant long-run parameter and lagged error
correction term in question is being considered to be plausible choice, there exist only seven countries,namely
Belgium, Canada, Greece, Luxembourg, Portugal, Sweden and the UK.
Table 2. ARDL Approach to Cointegration Summary Results
Short Run Diagnostics
Country Order of
ARDL
F
astatistics
Long-
run
slope
1t
EC
2
R
2
SC
F
2
FF
F
2
N
F
2
H
F
Australia SBC (2,2) 4.09 0.23 0.19
**
0.46 3.38 0.19 1.74 3.87
Austria AIC (2,0) 4.44 -0.11 -0.50 0.23
*
0.33 0.85 1.47 0.46
Belgium
2
R
(2, 2) 7.24 0.77
**
-0.27
*
0.39
*
1.60 0.07 1.90 0.46
Canada HQC (1,0) 4.10 0.97 -0.13
**
0.44
**
0.83 5.27 1.02 0.55
Denmark
2
R
(2, 1) 3.15 -1.43 -0.02 0.11 4.44 0.76 2.24 3.50
Finland SBC (0,0) NA 0.10 NA NA NA NA NA NA
France SBC (2,1) 6.81 -0.91
**
-0.04 0.76
*
1.67 3.53 0.94 0.46
Germany SBC (1,0) 1.32 0.27 -0.12 0.17 2.18 1.21 7.36 0.16
Greece SBC (1,2) 4.27 -0.97 -0.06
**
0.30
**
3.08 0.03 2.37 2.30
Hungary SBC (1,0) 0.22 0.35 NA NA NA NA NA NA
Iceland
2
R
(2, 1) 0.16 0.29 -0.02 0.01 1.92 1.64 0.68 0.02
Ireland SBC (1,0) 0.33 0.23 -0.06 -0.0 0.45 3.07 0.53 0.04
Italy SBC (1,0) 1.53 0.73 -0.03 0.01 2.00 1.42 8.15 0.13
Japan
2
R
(2, 0) 1.92 1.54 -0.01 0.02 1.33 1.34 9.81 0.20
South Korea
2
R
(2, 1) 0.09 -0.34 -0.01 0.18 0.13 0.49 2.02 1.61
Luxembourg AIC (1,1) 4.46 -0.48 -0.08
*
0.54
*
0.10 2.55 1.35 1.32
Mexico AIC (1,0) 0.89 -0.05 -0.07 0.01 0.77 3.49 0.89 2.87
Netherlands SBC (1,1) 0.76 5.38 -0.05 0.19 0.12 2.14 1.53 0.53
New Zealand HQC (1,0) 3.31 0.96 -0.05 0.24 0.29 3.31 0.02 0.50
Norway AIC (1,0) 3.15 0.54 -0.01 0.31 0.17 3.65 0.75 0.21
Poland SBC (1,0) 3.20 0.04 -0.50 0.17
**
2.90 8.40 41.4 0.33
Portugal
2
R
(1, 0) 4.73 -0.11 -0.63
**
0.22
**
3.66 5.29 59.4 2.78

16 Ferda Halicioglu and Sema Yolac / Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
Spain HQC (2,0) 2.61 0.33 -0.06 0.32
**
0.14 0.81 0.26 0.87
Sweden AIC (1,2) 2.75 0.09 -0.40
*
0.52
**
0.04 0.84 0.13 0.04
Switzerland HQC (1,0) 1.32 2.22 -0.02 0.10 0.74 1.66 0.09 0.17
Turkey HQC (1,0) 0.69 1.20 -0.04 0.09 0.23 2.90 0.13 0.04
UK SBC (1,0) 7.98 0.25
**
-0.50
*
0.38
*
0.19 0.99 0.90 0.03
USA AIC (1,0) 0.34 -2.45 0.01 0.01 0.80 0.04 9.49 0.23
a
2
R
, AIC, SBC, and HQC criteria are utilized appropriately to select the order of ARDL. The order of optimum lags is based on the
specified ARDL model. For example, SBC (2, 2) for Australia suggests that 2 lags are imposed on 'Self-employment rate and 2 lags on '
Unemployment rate in equation (3). F stands for the computed F statistics for the bounds test. F critical value for testing the existence of a
long-run relationship at 95 and 90 % level of significances respectively for I(0)and I(1) .*, ** and ***
NA (Not Available) stands for the fact that there exist no dynamic econometric results from these cases.
indicate, 1%, 5% and 10% significance
levels, respectively.
2
SC
F
,
2
FF
F
,
2
N
F
, and
2
H
F
are
Lagrange multiplier statistics for tests of residual correlation, functional form mis-specification, non-normal errors and heteroskedasticity,
respectively. These statistics are distributed as chi-squared variates with degrees of freedom in parentheses. The critical values for
84.3)1(
2
F
and
99.5)2(
2
F
at 5% significance level.
4. 2 The Long-Run Results
According to the results displayed in Table 2, the statistically significant slope parameters are available in two
different accounts. If one deems that the results from ARDL approach to cointegration procedure should be
considered only appropriate long-run outcomes, in this case there are 3 countries: Belgium, France and the UK. The
empirical results from these countries are also associated with satisfactory econometric diagnostics which make the
inferences reliable and consistent. Within this category, the case of Belgium and the UK extend the support for the
hypothesis of the refugee effect that increased unemployment will also raise the self-employment level, whilst the
reverse hypothesis is valid in the case of France. As far as the degree of positive impact of unemployment is
concerned, it is the highest in Belgium. The slope parameter of the Belgium econometric model, 0.77 indicates that a
1% rise in unemployment on average increases self-employment by 0.77 % on average during the estimation period.
If we assume in broad terms that the long-run relationships occur with a statistically significant lagged error term
and long-run slope parameter, within this category there are seven countries: Belgium, Canada, Greece,
Luxembourg, Portugal, Sweden and the UK. It appears that the long-run slope parameter of Belgium, Canada and
the UK econometric equations provide support for the positive relationship between unemployment and self-
employment whereas the results of Greece, Luxembourg and Sweden are related to negative effect of the refugee
effect.
It is clear that the negative impact of the refugee effect on self-employment is not adesirable choice. However, in
this situation the countries should design proactive economic policies to combat these impacts effectively.
Designing appropriate economic policies will be related to the extent of the problem and the economic structure of
the country question.
5.Conclusions
The aim of this paper was to test the existence of the refugee effect for 28 OECD countries. This objective was
aided by the technique of Pesaran et al. (2001) approach to cointegration which presents non-spurious estimates.
Subsequently, our work provides fresh evidence on the relationship between self-employment and unemployment.
The results reveal that there exist long-run relationships in the case of only seven countries in broad terms. Within
these long-run relationships, Belgium, Canada, Sweden and the UK offer support for the positive impact of
increased unemployment on self-employment suggesting that increased unemployment will stimulate the new
business starts ups whilst it is observed empirically that Luxembourg, Greece and Portugal will be suffering the

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Ferda Halicioglu and Sema Yolac / Procedia - Social and Behavioral Sciences 195 ( 2015 ) 10 – 17
detrimental effect of increased unemployment further. The econometric results did not reveal any long-run
relationships in the case of 22 out of 28 countries of OECD.
It is crystal clear that the empirical results in this study are subject to some limitations in regards to the data time
span and omitted variable bias. However, this is the first time series study that has utilized the ARDL approach to
cointegration procedure. It is envisaged that this paper will stimulate further empirical studies in this nature to reveal
more comprehensive insights into the understanding of the refugee effect.As for policy recommendations, countries
should provide further incentives for entrepreneurial spirits for sound and sustainable economic growth. Self-
employment as the most plausible proxy of entrepreneurship is the backbone of economies. Therefore, it is essential
that this type of business activities requires special attention and incentives all the time so that countries maintain
sound and sustainable economic growth rates.
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