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

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Author Info

  • Constant, Amelie F.

    () (George Washington University, Temple University)

  • Zimmermann, Klaus F.

    () (IZA and University of Bonn)

Abstract

Economically active people are either in gainful employment, are unemployed or selfemployed. 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 selfemployment, 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 selfemployment 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1386.

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Length: 54 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1386

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

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References

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  1. Constant, Amelie F. & Zimmermann, Klaus F., 2003. "The Dynamics of Repeat Migration: A Markov Chain Analysis," IZA Discussion Papers 885, Institute for the Study of Labor (IZA).
  2. David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
  3. Carrasco, Raquel, 1999. "Transitions to and from self-employment in Spain : an empirical analysis," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4681, Universidad Carlos III de Madrid.
  4. 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.
  5. 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 4207, C.E.P.R. Discussion Papers.
  6. Jensen, Kraen Blume & Ejrnaes, Mette & Nielsen, Helena Skyt & Würtz, Allan, . "Self-Employment among Immigrants: A Last Resort?," Economics Working Papers 2003-13, School of Economics and Management, University of Aarhus.
  7. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  8. Robert W. Fairlie & Bruce D. Meyer, 1996. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 757-793.
  9. Fairlie, Robert W, 1999. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 80-108, January.
  10. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
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  12. Blanchflower, David G. & Oswald, Andrew & Stutzer, Alois, 2001. "Latent entrepreneurship across nations," European Economic Review, Elsevier, vol. 45(4-6), pages 680-691, May.
  13. 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, vol. 18(2), pages 282-305, April.
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Citations

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Cited by:
  1. Ken Clark & Stephen Drinkwater, 2010. "Patterns of ethnic self-employment in time and space: evidence from British Census microdata," Small Business Economics, Springer, vol. 34(3), pages 323-338, April.
  2. Alexander S. Kritikos & Christoph Kneiding & Claas Christian Germelmann, 2006. "Is there a Market for Micro-Lending in Industrialized Countries? - Evidence from Germany," Working Papers 0003, Gesellschaft für Arbeitsmarktaktivierung (GfA).
  3. Werner Eichhors & Hilmar Schneider & Klaus F. Zimmermann, 2006. "Konzentration statt Verzettelung: Die deutsche Arbeitsmarktpolitik am Scheideweg," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(3), pages 377-394, 08.
  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, vol. 229(5), pages 523-543, October.
  5. 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).
  6. 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.
  7. Amelie Constant, 2008. "Businesswomen in Germany and Their Performance by Ethnicity: It Pays to Be Self-Employed," Discussion Papers of DIW Berlin 815, DIW Berlin, German Institute for Economic Research.
  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, vol. 22(4), pages 881-908, October.
  9. Productivity Commission, 2006. "The Role of Non-Traditional Work in the Australian Labour Market," Research Papers 0601, Productivity Commission, Government of Australia.
  10. Alexander S. Kritikos & Christoph Kneiding & Claas Christian Germelmann, 2008. "Demand Side Analysis of Microlending Markets in Industrialized Countries - Evidence from Germany -," Working Papers 014, Hanseatic University, Germany, Department of Economics.

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