The purpose of this paper is to reconcile the seeming paradox emerging in the literature relating unemployment to new-firm startup activity and the decision to enter into self-employment. On the one hand time series studies have generally found that entrepreneurship is promoted by high levels of unemployment. On the other hand, cross-sectional studies have generally found that startup activity tends to be depressed where unemployment is high. We present a model derived from Knight's theory of individual choice in order to reconcile this apparent paradox. Assuming presence of an economy-wide demand shock and industry-specific shocks, the model indeed predicts the relations between new firm startup and unemployment which are found in empirical analysis. Hence, instead of blaming specification errors or unobserved policy changes, the seeming paradox can be reconciled by solid economic theory. Copyright 1994 by Kluwer Academic Publishers
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Volume (Year): 6 (1994) Issue (Month): 5 (October) Pages: 381-85 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Cited by: (explanations, 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.)