What are the reasons behind this development? On the one hand people are _pushed_ into self-employment by lack of work opportunities. In such a case self-employment is the only available means of earning subsistence income. Also sometimes employers force workers into self-employment as a means lowering hiring and firing costs, as in the above example of health care sector reform in Bulgaria and Poland. In this case self-employment is a forced choice reflecting the lack of a gainful alternative. On the other hand people can be _pulled_ into selfemployment if the expected benefits, mainly earnings, exceed than those of wage employment. Self-employment in this case is a voluntary welfare-maximizing choice among different alternatives. In such a case self-employment often becomes a springboard for firm creation.

In reality self-employed workers comprise of both categories: aspiring entrepreneurs and subsistence workers for whom unemployment is not a viable alternative (Box 4). However, there is some evidence that in ECA the push factors tend to prevail, and the majority of self-employed resort to self-employment to avoid unemployment and earn subsistence income (Earle and Sakova, 2000; Verme, 2004). The recourse to subsistence agriculture (as it has happened in Poland, Romania, FYR Macedonia and in the most of CIS) is the point in case. Thus, the evidence does not support the optimistic view that the rise in self-employment reflects the development of entrepreneurship and new business opportunities. To a large extent it reflects difficult labor market conditions and lack of work opportunities.

## **Box 4  Self-employment: a springboard for firm creation, or a coping strategy?**

Is the growth in self-employment observed in transition economies a positive phenomenon? On the one hand it is an indication of a developing entrepreneurial spirit, and a springboard to starting a small business. Self employment can be a source of an “entrepreneurship premium” and as such offer better than normal earning opportunities.

On the other hand, the growth in self-employment may be a symptom of a depressed labor market, where firms create few jobs, and employment opportunities are scarce. It can be associated with low value-added activates, which barely provide substance income. So, the assessment depends on the distribution of productivity and earnings associated with self-employment jobs (relative to that of dependent employment). At the same time, self-employment needs to be assessed against the counterfactual, which is either lower earnings or no earnings whatsoever. From such a perspective, selfemployment is unambiguously a welfare enhancing economic activity.

For example, in Albania or in Georgia the self-employed account for a large proportion of the poor, and thus self-employment is a copying strategy, a means of earning subsistence income. In contrast, in more developed countries, such as Estonia or Hungary, the incidence of poverty among the selfemployed is negligible. In this context self employment is likely to be a gainful entrepreneurial activity (World Bank, 2000).

# _Rising incidence of irregular jobs?_

The nature of dependent wage employment has been also changing. Before the transition employment meant full time permanent labor contract. At present, fixed-term and part-time jobs account for a significant part of total formal sector employment in transition economies. On average, fixed term jobs share in total employment exceeds 7 percent, and that of part-time jobs is another 7 percent (Table 3). In both cases, there is visible cross-country variation. The incidence of fixed-term contracts ranges from less than 3 percent in Estonia to over 15 percent in Poland. For comparison, the EU15 average is 13 percent. As to part-time jobs, their incidence 15