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Self-Employment Dynamics Across the Business Cycle: Migrants vs Natives

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  • Constant, Amelie
  • Zimmermann, Klaus F

Abstract

Economically active people are either in gainful employment, are unemployed or self-employed. We are interested in the dynamics of the transitions between these states across the business cycle. It is generally perceived that employment or self-employment are absorbing states. However, innovations, structural changes and business cycles generate strong adjustment processes that lead to fluctuations between employment and self-employment, directly or through the unemployment state. Migrants are more likely to be sensitive to adjustment pressures than natives, since they have less stable jobs and choose more often self-employment to avoid periods of unemployment. These issues are investigated using a huge micro data set generated from 19 waves of the German Socioeconomic Panel. The findings suggest that the conditional probabilities of entry into self-employment are more than twice as high from the status of unemployment as from the status of employment. Self-employment is also an important channel back to regular employment. Business cycle effects strongly impact the employment transition matrix, and migrants take a larger part in the adjustment process. They use self-employment as a mechanism to circumvent and escape unemployment and to integrate into the host country's labour market.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4754.

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Date of creation: Nov 2004
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Handle: RePEc:cpr:ceprdp:4754

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Keywords: business cycle; entrepreneurship; Markov chain analysis; migration; self-employment;

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Cited by:
  1. Román, Concepción & Congregado, Emilio & Millán, José María, 2013. "Start-up incentives: Entrepreneurship policy or active labour market programme?," Journal of Business Venturing, Elsevier, vol. 28(1), pages 151-175.
  2. Yu, Li & Orazem, Peter & Jolly, Robert W., 2013. "Entrepreneurship Over The Business Cycle," Staff General Research Papers 36672, Iowa State University, Department of Economics.

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