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Stopping Start-Ups: How The Business Cycle Affects Entrepreneurship

Author

Listed:
  • Yu, Li
  • Orazem, Peter
  • Jolly, Robert W.

Abstract

This study analyzes whether economic conditions at the time of labor market entry affect entrepreneurship, using difference in business start-ups between cohorts of college students graduating in boom or bust economic conditions. Those graduating during an economic bust tend to delay their business start-ups relative to boom period graduates by about two years. Our results are consistent with additional findings that higher unemployment rates at time of graduation significantly delay the first business start-up across all college graduation cohorts over the 1982-2004 period. The adverse effect of a bust is temporary, delaying but not preventing self-employment over the life-cycle.

Suggested Citation

  • Yu, Li & Orazem, Peter & Jolly, Robert W., 2009. "Stopping Start-Ups: How The Business Cycle Affects Entrepreneurship," Staff General Research Papers Archive 13086, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:13086
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    File URL: http://www2.econ.iastate.edu/papers/p1456-2009-07-03.pdf
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    Keywords

    Entrepreneurship; boom; bust; occupatiopnal choice; survivor analysis; business cycle; cohort;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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