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Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars

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  • Holtz-Eakin Douglas

    (Syracuse University)

  • Rosen Harvey S

    (Princeton University)

Abstract

In this paper we analyze microdata to explore differences in the rates at which American and German workers leave their salaried jobs to become self-employed. We document that the rate of self-employment is lower in Germany than in the United States, and the rate of transition from wage-earning to self-employment is lower as well. Our results suggest that German workers face liquidity constraints that are more severe than those of their American counterparts and an environment that discourages transitions to self-employment. The difference in transition rates cannot be attributed to observable differences between German and American workers.

Suggested Citation

  • Holtz-Eakin Douglas & Rosen Harvey S, 2005. "Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-28, February.
  • Handle: RePEc:bpj:bejeap:v:contributions.4:y:2005:i:1:n:1
    DOI: 10.2202/1538-0645.1029
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    References listed on IDEAS

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    1. Raquel Carrasco, 1999. "Transitions to and From Self‐employment in Spain: An Empirical Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(3), pages 315-341, August.
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    6. Yannis Georgellis & Howard Wall, 2005. "Gender differences in self-employment," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(3), pages 321-342.
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    8. Blanchflower, David G & Meyer, Bruce D, 1994. "A Longitudinal Analysis of the Young Self-Employed in Australia and the United States," Small Business Economics, Springer, vol. 6(1), pages 1-19, February.
    9. Harhoff, Dietmar & Stahl, Konrad & Woywode, Michael, 1998. "Legal Form, Growth and Exit of West German Firms--Empirical Results for Manufacturing, Construction, Trade and Service Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 453-488, December.
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    Cited by:

    1. Davud Rostam-Afschar, 2014. "Entry regulation and entrepreneurship: a natural experiment in German craftsmanship," Empirical Economics, Springer, vol. 47(3), pages 1067-1101, November.
    2. Blanchflower, David G. & Shadforth, Chris, 2007. "Entrepreneurship in the UK," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 3(4), pages 257-364, July.
    3. Robert W. Fairlie, 2013. "Minority and immigrant entrepreneurs: access to financial capital," Chapters, in: Amelie F. Constant & Klaus F. Zimmermann (ed.), International Handbook on the Economics of Migration, chapter 8, pages 153-175, Edward Elgar Publishing.
    4. Frank M. Fossen, 2007. "Risky Earnings, Taxation and Entrepreneurial Choice: A Microeconometric Model for Germany," Discussion Papers of DIW Berlin 705, DIW Berlin, German Institute for Economic Research.
    5. Robert W. Fairlie & Harry A. Krashinsky, 2012. "Liquidity Constraints, Household Wealth, And Entrepreneurship Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(2), pages 279-306, June.
    6. Fonseca, Raquel & Lord, Simon, 2016. "Les déterminants du travail autonome au Québec et au Canada (1993-2010)," L'Actualité Economique, Société Canadienne de Science Economique, vol. 92(3), pages 489-513, Septembre.
    7. Robert W. Fairlie & Alicia M. Robb, 2007. "Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 289-323.
    8. Dorothea Schäfer & Oleksandr Talavera, 2006. "Small-Scale Business Survival and Inheritance: Evidence from Germany," Discussion Papers of DIW Berlin 636, DIW Berlin, German Institute for Economic Research.
    9. Sauer, Robert M. & Wilson, Tanya, 2016. "The rise of female entrepreneurs: New evidence on gender differences in liquidity constraints," European Economic Review, Elsevier, vol. 86(C), pages 73-86.
    10. Robert W. Fairlie, 2013. "Entrepreneurship, Economic Conditions, and the Great Recession," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 207-231, June.
    11. Nykvist, Jenny, 2005. "Entrepreneurship and Liquidity Constraints: Evidence from Sweden," Working Paper Series 2005:21, Uppsala University, Department of Economics.
    12. Glocker, Daniela & Steiner, Viktor, 2007. "Self-Employment: A Way to End Unemployment? Empirical Evidence from German Pseudo-Panel Data," IZA Discussion Papers 2561, Institute of Labor Economics (IZA).
    13. Raquel Fonseca & Simon Lord, 2015. "Les déterminants du travail autonome au Québec et au Canada (1993-201," Cahiers de recherche 1517, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    14. Dorothea Schäfer & Oleksandr Talavera, 2009. "Small business survival and inheritance: evidence from Germany," Small Business Economics, Springer, vol. 32(1), pages 95-109, January.
    15. Rafael P. Ribas, 2014. "Liquidity Constraints, Informal Financing, and Entrepreneurship: Direct and Indirect Effects of a Cash Transfer Programme," Working Papers 131, International Policy Centre for Inclusive Growth.
    16. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
    17. Kapinos, Pavel & Gurley-Calvez, Tami & Kapinos, Kandice, 2016. "(Un)expected housing price changes: Identifying the drivers of small business finance," Journal of Economics and Business, Elsevier, vol. 84(C), pages 79-94.

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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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