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Self-Employment: A Way to End Unemployment? Empirical Evidence from German Pseudo-Panel Data

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Author Info
Daniela Glocker () (DIW Berlin)
Viktor Steiner () (Free University Berlin, DIW Berlin and IZA)

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Abstract

This paper contributes to the policy-relevant question whether self-employment is a way out of (long-term) unemployment. We estimate the relationship between the entry rate into selfemployment and previous (long-term) unemployment on the basis of pseudo-panel data for Germany in the period 1996-2002. The estimation method accounts for cohort fixed effects and measurement errors induced by the pseudo panel structure. We find that previous (longterm) unemployment significantly increases entry rates into self-employment for both men and women. These effects are quantitatively important, both in absolute terms and compared to other potential determinants of self-employment transitions, such as age, the level of vocational qualification and certain household characteristics.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2561.

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Length: 28 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2561

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Related research
Keywords: self-employment; entrepreneurship; entry rate; start-ups; unemployment; pseudo-panel; age and cohort effects;

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models

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References listed on IDEAS
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.:
  1. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-66, May.
  2. Cressy, Robert, 2000. "Credit rationing or entrepreneurial risk aversion? An alternative explanation for the Evans and Jovanovic finding," Economics Letters, Elsevier, vol. 66(2), pages 235-240, February. [Downloadable!] (restricted)
  3. Constant, Amelie & Zimmermann, Klaus F., 2004. "The Making of Entrepreneurs in Germany: Are Native Men and Immigrants Alike?," IZA Discussion Papers 1440, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Martinez-Granado, Maite, 2002. "Self-Employment and Labour Market Transitions: A Multiple State Model," CEPR Discussion Papers 3661, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126. [Downloadable!] (restricted)
  6. Marco Caliendo & Frank M. Fossen & Alexander S. Kritikos, 2006. "Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally-Validated Survey," Discussion Papers of DIW Berlin 600, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  7. Carrasco, R., 1997. "Transitions to and from Self-Employment in Spain: An Empirical Analysis," Papers 9710, Centro de Estudios Monetarios Y Financieros-.
    Other versions:
  8. Douglas Holtz-Eakin & Harvey S. Rosen, 2005. "Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  9. David B. Audretsch & Roy Thurik & Andre van Stel & M.A. Carree, 2006. "Does Self-Employment Reduce Unemployment?," Papers on Entrepreneurship, Growth and Public Policy 2005-07, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
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  10. 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. [Downloadable!] (restricted)
  11. Frank M. Fossen & Viktor Steiner, 2006. "Income Taxes and Entrepreneurial Choice: Empirical Evidence from Germany," Discussion Papers of DIW Berlin 582, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  12. Hans J. Baumgartner & Marco Caliendo, 2007. "Turning Unemployment into Self-Employment: Effectiveness and Efficiency of Two Start-Up Programmes," Discussion Papers of DIW Berlin 671, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  13. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn. [Downloadable!] (restricted)
  14. Foti, Alessandro & Vivarelli, Marco, 1994. " An Econometric Test of the Self-Employment Model: The Case of Italy," Small Business Economics, Springer, vol. 6(2), pages 81-93, April.
  15. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August. [Downloadable!] (restricted)
  16. Pfeiffer, Friedhelm & Reize, Frank, 2000. "Business start-ups by the unemployed -- an econometric analysis based on firm data," Labour Economics, Elsevier, vol. 7(5), pages 629-663, September. [Downloadable!] (restricted)
  17. Blanchflower, D.G. & Oswald, A., 1991. "What Makes an Entrepreneur?," Economics Series Working Papers 99125, University of Oxford, Department of Economics.
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  18. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August. [Downloadable!] (restricted)
  19. Bernhard Boockmann & Viktor Steiner, 2006. "Cohort effects and the returns to education in West Germany," Applied Economics, Taylor and Francis Journals, vol. 38(10), pages 1135-1152, June. [Downloadable!] (restricted)
    Other versions:
Full references

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.)

  1. Milo Bianchi, 2008. "Financial development, entrepreneurship and job satisfaction," PSE Working Papers 2008-59, PSE (Ecole normale supérieure), revised Feb 2009. [Downloadable!]
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