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Self-Employment Dynamics across the Business Cycle: Migrants versus Natives

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  • Amelie Constant
  • Klaus F. Zimmermann

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 labor market.

Suggested Citation

  • Amelie Constant & Klaus F. Zimmermann, 2004. "Self-Employment Dynamics across the Business Cycle: Migrants versus Natives," Discussion Papers of DIW Berlin 455, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp455
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    References listed on IDEAS

    as
    1. Amelie F. Constant & Klaus F. Zimmermann, 2012. "The Dynamics of Repeat Migration: A Markov Chain Analysis," International Migration Review, Wiley Blackwell, vol. 46(2), pages 362-388, June.
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    6. 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.
    7. Constant, Amelie F. & Shachmurove, Yochanan & Zimmermann, Klaus F., 2003. "What Makes an Entrepreneur and Does It Pay? Native Men, Turks, and Other Migrants in Germany," IZA Discussion Papers 940, Institute for the Study of Labor (IZA).
    8. Carrasco, Raquel, 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.
    9. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 485-506.
    10. David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
    11. 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.
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    Cited by:

    1. Werner, Arndt & Moog, Petra, 2009. "Why do Employees Leave Their Jobs for Self-Employment? – The Impact of Entrepreneurial Working Conditions in Small Firms," MPRA Paper 18826, University Library of Munich, Germany.
    2. Milo Bianchi, 2012. "Financial Development, Entrepreneurship, and Job Satisfaction," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 273-286, February.
    3. 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.
    4. Milo Bianchi, 2012. "Financial Development, Entrepreneurship, and Job Satisfaction," Post-Print hal-01629748, HAL.
    5. Helena Svaleryd, 2015. "Self-employment and the local business cycle," Small Business Economics, Springer, vol. 44(1), pages 55-70, January.
    6. 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).
    7. 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, August.
    8. Kritikos Alexander & Kneiding Christoph & Germelmann Claas Christian, 2009. "Demand Side Analysis of Microlending Markets in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(5), pages 523-543, October.
    9. 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).
    10. repec:wsi:jecxxx:v:22:y:2014:i:03:n:s0218495814500150 is not listed on IDEAS
    11. 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.
    12. Amelie F. Constant, 2009. "Businesswomen in Germany and their performance by ethnicity: It pays to be self-employed," International Journal of Manpower, Emerald Group Publishing, vol. 30(1/2), pages 145-162, March.
    13. 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;European Society for Population Economics, vol. 22(4), pages 881-908, October.
    14. Productivity Commission, 2006. "The Role of Non-Traditional Work in the Australian Labour Market," Research Papers 0601, Productivity Commission, Government of Australia.
    15. repec:dau:papers:123456789/5067 is not listed on IDEAS
    16. 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.
    17. repec:spr:eurasi:v:4:y:2014:i:1:p:51-87 is not listed on IDEAS
    18. repec:spr:pharme:v:4:y:2014:i:1:p:51-87 is not listed on IDEAS
    19. 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.
    20. repec:spr:intemj:v:13:y:2017:i:4:d:10.1007_s11365-017-0456-5 is not listed on IDEAS

    More about this item

    Keywords

    Self-employment; Entrepreneurship; Business cycle; Migration; Markov chain analysis;

    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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