Institutional Explanations for Patterns of Entrepreneurial Activity: The Case of the Dutch Task Market.

This case study investigates the rise of solo self-employment in the Netherlands as well as the increasing importance of entrepreneurial activity by employees. A fifty percent increase in the number of Dutch solo self-employed in the last decade has led to more than 800,000 individuals now working for own risk and reward. A minority can be regarded as ambitious with respect to innovation orientation. Figures about entrepreneurial employees have only been collected since a few years. In the short term, the share of entrepreneurial employees in the Dutch adult population seems to be stable. Their current number has been estimated on more than half a million. More and more individuals combine multiple jobs, or are employed and self-employed simultaneously. The report attempts to explain which institutions have contributed to the deviating pattern in Dutch solo self-employment numbers from a European perspective. We argue that changes in formal institutions regarding the judicial and tax treatment of self-employed as compared to that of employees are the main determinant. Especially tax facilities like the profit exemption for SMEs, the self-employed deduction, and the starters deduction have increased the attractiveness of working as or working with solo self-employed since the second half of the nineties. Who benefits most from the difference in tax treatment, either the solo self-employed individual or his/her client, depends on the parties’ bargaining power when negotiating about the hourly rate. The developments in the Netherlands fit into the broader shift from the managed economy to a more entrepreneurial economy. It is argued that, mainly driven by globalisation and technological change, labour is increasingly organized in sets of tasks. On a task market, the total amount of work is divided among all workers, i.e. both employed and self-employed. Workers differ with respect to the completeness of their labour contract, and the degree of innovativeness of the tasks that are specified in that contract, either implicitly or explicitly. Policy should aim for developing and improving workers’ modern skills like creativity and innovation, rather than educating people for specific jobs. Also, workers should be made aware that they themselves are increasingly responsible for human capital investments during their own career. Finally, given the blurring boundaries between employment and self-employment, the current legal distinction should be loosened by providing all workers with equal access to the welfare system