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


  • Constant, Amelie
  • Zimmermann, Klaus F


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.

Suggested Citation

  • Constant, Amelie & Zimmermann, Klaus F, 2004. "Self-Employment Dynamics Across the Business Cycle: Migrants vs Natives," CEPR Discussion Papers 4754, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4754

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    References listed on IDEAS

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    Cited by:

    1. Milo Bianchi, 2012. "Financial Development, Entrepreneurship, and Job Satisfaction," Post-Print hal-01629748, HAL.
    2. Yu, Li & Orazem, Peter F. & Jolly, Robert W., 2014. "Entrepreneurship over the business cycle," Economics Letters, Elsevier, vol. 122(2), pages 105-110.
    3. repec:spr:eurasi:v:4:y:2014:i:1:p:51-87 is not listed on IDEAS
    4. repec:spr:pharme:v:4:y:2014:i:1:p:51-87 is not listed on IDEAS
    5. Helena Svaleryd, 2015. "Self-employment and the local business cycle," Small Business Economics, Springer, vol. 44(1), pages 55-70, January.
    6. repec:wsi:jecxxx:v:22:y:2014:i:03:n:s0218495814500150 is not listed on IDEAS
    7. 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.
    8. Marios Michaelides & Scott Davis, 2016. "From unemployment to self-employment: the role of entrepreneurship training," University of Cyprus Working Papers in Economics 09-2016, University of Cyprus Department of Economics.

    More about this item


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

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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