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

Author

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  • Zimmermann, Klaus F.
  • Constant, Amelie

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 labour market.

Suggested Citation

  • Zimmermann, Klaus F. & Constant, Amelie, 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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    More about this item

    Keywords

    Self-employment; entrepreneurship; Business cycle; Migration; Markov chain analysis;
    All these keywords.

    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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