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Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars

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  • Holtz-Eakin Douglas

    ()
    (Syracuse University)

  • Rosen Harvey S

    ()
    (Princeton University)

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    Abstract

    In this paper we analyze microdata to explore differences in the rates at which American and German workers leave their salaried jobs to become self-employed. We document that the rate of self-employment is lower in Germany than in the United States, and the rate of transition from wage-earning to self-employment is lower as well. Our results suggest that German workers face liquidity constraints that are more severe than those of their American counterparts and an environment that discourages transitions to self-employment. The difference in transition rates cannot be attributed to observable differences between German and American workers.

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    Bibliographic Info

    Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

    Volume (Year): 4 (2005)
    Issue (Month): 1 (February)
    Pages: 1-28

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    Handle: RePEc:bpj:bejeap:v:contributions.4:y:2005:i:1:n:1

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    Web page: http://www.degruyter.com

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    Cited by:
    1. Davud Rostam-Afschar, 2010. "Entry Regulation and Entrepreneurship: Empirical Evidence from a German Natural Experiment," Discussion Papers of DIW Berlin 1065, DIW Berlin, German Institute for Economic Research.
    2. Robert W. Fairlie & Harry A. Krashinsky, 2012. "Liquidity Constraints, Household Wealth, And Entrepreneurship Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(2), pages 279-306, 06.
    3. Daniela Glocker & Viktor Steiner, 2007. "Self-Employment - a Way to End Unemployment?: Empirical Evidence from German Pseudo-Panel Data," Discussion Papers of DIW Berlin 661, DIW Berlin, German Institute for Economic Research.
    4. Fairlie, Rob, 2011. "Entrepreneurship, Economic Conditions, and the Great Recession," Santa Cruz Department of Economics, Working Paper Series qt0x3809sf, Department of Economics, UC Santa Cruz.
    5. Frank M. Fossen, 2007. "Risky Earnings, Taxation and Entrepreneurial Choice: A Microeconometric Model for Germany," SOEPpapers on Multidisciplinary Panel Data Research 29, DIW Berlin, The German Socio-Economic Panel (SOEP).
    6. Dorothea Schäfer & Oleksandr Talavera, 2009. "Small business survival and inheritance: evidence from Germany," Small Business Economics, Springer, Springer, vol. 32(1), pages 95-109, January.
    7. Blanchflower, David G. & Shadforth, Chris, 2007. "Entrepreneurship in the UK," IZA Discussion Papers 2818, Institute for the Study of Labor (IZA).
    8. Dorothea Schäfer & Oleksandr Talavera, 2006. "Small-Scale Business Survival and Inheritance: Evidence from Germany," Discussion Papers of DIW Berlin 636, DIW Berlin, German Institute for Economic Research.
    9. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 283-287, May.
    10. 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.

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