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The impact of labour market regulations on (potential) entrepreneurs: the case of Germany

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  • Petra Moog
  • Uschi Backes-Gellner

Abstract

This paper explores the impact of German labour market regulations on the willingness of labour market entrants to start their own business. We study the legal situation, the actual and the perceived constraints imposed on businesses as well as the actual flexibility available of start-ups. We find strong evidence that labour market regulations are often misperceived in Germany. Furthermore, these misperceptions distort the willingness to become selfemployed. Start-ups are de jure hardly affected by labour market regulations because of a large number of exemptions. They are able to use a number of flexibility measures and thereby avoid regulatory restrictions. However, perceptions are quite the opposite, particularly in legal areas with high media coverage. This leads to a strong reluctance of labour market entrants to consider a start-up. Thus, measures aiming at increasing entrepreneurship should place strong emphasis on accurate knowledge of regulatory constraints and particularly in Germany, on less sceptical media coverage.

Suggested Citation

  • Petra Moog & Uschi Backes-Gellner, 2009. "The impact of labour market regulations on (potential) entrepreneurs: the case of Germany," International Journal of Entrepreneurship and Innovation Management, Inderscience Enterprises Ltd, vol. 10(1), pages 53-70.
    • Handle: RePEc:ids:ijeima:v:10:y:2009:i:1:p:53-70
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    Cited by:

    1. Kun Fu & Anne-Sophie Larsson & Karl Wennberg, 2018. "Habitual entrepreneurs in the making: how labour market rigidity and employment affects entrepreneurial re-entry," Small Business Economics, Springer, vol. 51(2), pages 465-482, August.

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