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Self-Employment Dynamics across the Business Cycle: Migrants versus Natives

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  • Amelie Constant
  • Klaus F. Zimmermann

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 labor market.

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 455.

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Length: 51 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp455

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Keywords: Self-employment; Entrepreneurship; Business cycle; Migration; Markov chain analysis;

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References

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  1. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, American Economic Association, vol. 79(3), pages 519-35, June.
  2. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
  3. Constant, Amelie & Zimmermann, Klaus F, 2003. "The Dynamics of Repeat Migration: A Markov Chain Analysis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4124, C.E.P.R. Discussion Papers.
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  5. Blanchflower, David G. & Oswald, Andrew & Stutzer, Alois, 2001. "Latent entrepreneurship across nations," European Economic Review, Elsevier, Elsevier, vol. 45(4-6), pages 680-691, May.
  6. Constant, Amelie & Shachmurove, Yochanan & Zimmermann, Klaus F, 2004. "What Makes an Entrepreneur and Does it Pay? Native Men, Turks and Other Migrants in Germany," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4207, C.E.P.R. Discussion Papers.
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  8. 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.
  9. Fairlie, Robert, 2014. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Santa Cruz Department of Economics, Working Paper Series qt24p7v6gc, Department of Economics, UC Santa Cruz.
  10. Carrasco, R., 1997. "Transitions to and from Self-Employment in Spain: An Empirical Analysis," Papers, Centro de Estudios Monetarios Y Financieros- 9710, Centro de Estudios Monetarios Y Financieros-.
  11. David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
  12. Jensen, Kraen Blume & Ejrnaes, Mette & Nielsen, Helena Skyt & Würtz, Allan, . "Self-Employment among Immigrants: A Last Resort?," Economics Working Papers, School of Economics and Management, University of Aarhus 2003-13, School of Economics and Management, University of Aarhus.
  13. Fairlie, Robert, 2014. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Santa Cruz Department of Economics, Working Paper Series qt49c4n0fg, Department of Economics, UC Santa Cruz.
  14. Clark, Kenneth & Drinkwater, Stephen, 1998. "Ethnicity and Self-Employment in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(3), pages 383-407, August.
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Citations

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Cited by:
  1. Bianchi, Milo, 2012. "Financial Development, Entrepreneurship, and Job Satisfaction," Economics Papers from University Paris Dauphine 123456789/5067, Paris Dauphine University.
  2. Svaleryd, Helena, 2013. "Self-employment and the local business cycle," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2013:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Constant, Amelie F., 2008. "Businesswomen in Germany and Their Performance by Ethnicity: It Pays to Be Self-Employed," IZA Discussion Papers 3644, Institute for the Study of Labor (IZA).
  4. Alexander Kritikos & Christoph Kneiding & Claas Christian Germelmann, 2009. "Demand Side Analysis of Microlending Markets in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(5), pages 523-543, October.
  5. Werner Eichhors & Hilmar Schneider & Klaus F. Zimmermann, 2006. "Konzentration statt Verzettelung: Die deutsche Arbeitsmarktpolitik am Scheideweg," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 7(3), pages 377-394, 08.
  6. 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.
  7. Ken Clark & Stephen Drinkwater, 2010. "Patterns of ethnic self-employment in time and space: evidence from British Census microdata," Small Business Economics, Springer, Springer, vol. 34(3), pages 323-338, April.
  8. Kræn Blume & Mette Ejrnæs & Helena Nielsen & Allan Würtz, 2009. "Labor market transitions of immigrants with emphasis on marginalization and self-employment," Journal of Population Economics, Springer, Springer, vol. 22(4), pages 881-908, October.
  9. Werner, Arndt & Moog, Petra, 2009. "Why do Employees Leave Their Jobs for Self-Employment? – The Impact of Entrepreneurial Working Conditions in Small Firms," MPRA Paper 18826, University Library of Munich, Germany.
  10. Bella Struminskaya, 2011. "Selbständigkeit von Personen mit Migrationshintergrund in Deutschland: Ursachen ethnischer Unternehmung," SOEPpapers on Multidisciplinary Panel Data Research 418, DIW Berlin, The German Socio-Economic Panel (SOEP).
  11. Amelie Constant & Yochanan Shachmurove, 2005. "The comparison of incomes of self-employed and salaried workers among German Nationals and immigrants," PIER Working Paper Archive 05-030, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  12. Alexander S. Kritikos & Christoph Kneiding & Claas Christian Germelmann, 2006. "Is there a Market for Micro-Lending in Industrialized Countries? - Evidence from Germany," Working Papers, Gesellschaft für Arbeitsmarktaktivierung (GfA) 0003, Gesellschaft für Arbeitsmarktaktivierung (GfA).
  13. Productivity Commission, 2006. "The Role of Non-Traditional Work in the Australian Labour Market," Research Papers, Productivity Commission, Government of Australia 0601, Productivity Commission, Government of Australia.

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