Advanced Search
MyIDEAS: Login to save this article or follow this journal

Entrepreneurship, Economic Conditions, and the Great Recession

Contents:

Author Info

  • Robert W. Fairlie

Abstract

The “Great Recession†resulted in many business closings and foreclosures, but what effect did ithave on business formation? On the one hand, recessions decrease potential business income andwealth, but on the other hand they restrict opportunities in the wage/salary sector leaving the neteffect on entrepreneurship ambiguous. The most up-to-date microdata available -- the 1996 to2009 Current Population Survey (CPS) -- are used to conduct a detailed analysis of thedeterminants of entrepreneurship at the individual level to shed light on this question. Regressionestimates indicate that local labor market conditions are a major determinant of entrepreneurship.Higher local unemployment rates are found to increase the probability that individuals startbusinesses. Home ownership and local home values for home owners are also found to havepositive effects on business creation, but these effects are noticeably smaller. Additionalregression estimates indicate that individuals who are initially not employed respond more to highlocal unemployment rates by starting businesses than wage/salary workers. The results point to aconsistent picture – the positive influences of slack labor markets outweigh the negativeinfluences resulting in higher levels of business creation. Using the regression estimates for thelocal unemployment rate effects, I find that the predicted trend in entrepreneurship rates tracksthe actual upward trend in entrepreneurship extremely well in the Great Recession.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1111/10.1111/gems.2013.22.issue-2
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 22 (2013)
Issue (Month): 2 (06)
Pages: 207-231

as in new window
Handle: RePEc:bla:jemstr:v:22:y:2013:i:2:p:207-231

Contact details of provider:
Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

Order Information:
Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Lofstrom, Magnus & Bates, Timothy, 2007. "African Americans' Pursuit of Self-Employment," IZA Discussion Papers 3156, Institute for the Study of Labor (IZA).
  2. Fairlie Robert & Woodruff Christopher M., 2010. "Mexican-American Entrepreneurship," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-44, February.
  3. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  4. Farber, Henry S, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(4), pages S142-69, October.
  5. Ken Cavalluzzo & John Wolken, 2005. "Small Business Loan Turndowns, Personal Wealth, and Discrimination," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2153-2178, November.
  6. Taylor, Mark P, 1999. "Self-Employment and Windfall Gains in Britain: Evidence From Panel Data," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2084, C.E.P.R. Discussion Papers.
  7. Zissimopoulos, Julie M. & Karoly, Lynn A., 2007. "Transitions to self-employment at older ages: The role of wealth, health, health insurance and other factors," Labour Economics, Elsevier, vol. 14(2), pages 269-295, April.
  8. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521899604, 9.
  9. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Entrepreneurial Decisions and Liquidity Constraints," NBER Working Papers 4526, National Bureau of Economic Research, Inc.
  10. Lindh, Thomas & Ohlsson, Henry, 1998. "Self-Employment and Wealth Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(1), pages 25-42, March.
  11. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 16(1), pages 26-60, January.
  12. Steven J. Davis & John Haltiwanger & Ron S. Jarmin & C. J. Krizan & Javier Miranda & Alfred Nucci & Kristin Sandusky, 2007. "Measuring the Dynamics of Young and Small Businesses: Integrating the Employer and Nonemployer Universes," NBER Working Papers 13226, National Bureau of Economic Research, Inc.
  13. Fairlie, Robert W, 1999. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(1), pages 80-108, January.
  14. Robert Fairlie & Alicia Robb, 2005. "Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital," Working Papers 05-06, Center for Economic Studies, U.S. Census Bureau.
  15. Thomas Dunn & Douglas Holtz-Eakin, 1996. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc.
  16. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, December.
  17. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(2), pages 319-347, April.
  18. Bruce D. Meyer, 1990. "Why Are There So Few Black Entrepreneurs?," NBER Working Papers 3537, National Bureau of Economic Research, Inc.
  19. Robert W. Fairlie & Harry A. Krashinsky, 2012. "Liquidity Constraints, Household Wealth, and Entrepreneurship Revisited," CESifo Working Paper Series 3784, CESifo Group Munich.
  20. Avery, Robert B. & Bostic, Raphael W. & Samolyk, Katherine A., 1998. "The role of personal wealth in small business finance," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 1019-1061, August.
  21. Lofstrom, Magnus & Wang, Chunbei, 2006. "Hispanic Self-Employment: A Dynamic Analysis of Business Ownership," IZA Discussion Papers 2101, Institute for the Study of Labor (IZA).
  22. William D. Bradford, 2003. "The Wealth Dynamics of Entrepreneurship for Black and White Families in the U.S," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(1), pages 89-116, 03.
  23. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(439), pages 1515-26, November.
  24. Michael Elsby & Bart Hobjin & Aysegül Sahin, 2010. "The labor market in the Great Recession," Working Paper Series 2010-07, Federal Reserve Bank of San Francisco.
  25. Henry S. Farber, 1999. "Alternative and Part-Time Employment Arrangements as a Response to Job Loss," NBER Working Papers 7002, National Bureau of Economic Research, Inc.
  26. Johansson, Edvard, 2000. " Self-Employment and Liquidity Constraints: Evidence from Finland," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 102(1), pages 123-34, March.
  27. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 808-27, August.
  28. Nykvist, Jenny, 2005. "Entrepreneurship and Liquidity Constraints: Evidence from Sweden," Working Paper Series, Uppsala University, Department of Economics 2005:21, Uppsala University, Department of Economics.
  29. John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
  30. Parker,Simon C., 2009. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521728355, 9.
  31. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(2), pages 282-305, April.
  32. Holtz-Eakin Douglas & Rosen Harvey S, 2005. "Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-28, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Robert W. Fairlie & Dean Karlan & Jonathan Zinman, 2012. "Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training," NBER Working Papers 17804, National Bureau of Economic Research, Inc.
  2. Manuel Adelino & Song Ma & David T. Robinson, 2014. "Firm Age, Investment Opportunities, and Job Creation," NBER Working Papers 19845, National Bureau of Economic Research, Inc.
  3. Yu, Li & Orazem, Peter F. & Jolly, Robert W., 2014. "Entrepreneurship over the business cycle," Economics Letters, Elsevier, vol. 122(2), pages 105-110.
  4. Francine Lafontaine & Kathryn Shaw, 2014. "Serial Entrepreneurship: Learning by Doing?," NBER Working Papers 20312, National Bureau of Economic Research, Inc.
  5. Gohmann, Stephan F. & Fernandez, Jose M., 2014. "Proprietorship and unemployment in the United States," Journal of Business Venturing, Elsevier, vol. 29(2), pages 289-309.
  6. Fritsch, Michael & Kritikos, Alexander S. & Pijnenburg, Katharina, 2013. "Business Cycles, Unemployment and Entrepreneurial Entry: Evidence from Germany," IZA Discussion Papers 7852, Institute for the Study of Labor (IZA).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:22:y:2013:i:2:p:207-231. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.