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

  • Constant, Amelie F.

    ()

    (George Washington University, Temple University)

  • Zimmermann, Klaus F.

    ()

    (IZA and University of Bonn)

Economically active people are either in gainful employment, are unemployed or selfemployed. 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 selfemployment, 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 selfemployment 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1386.

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Length: 54 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1386
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  1. Jensen, Kraen Blume & Ejrnaes, Mette & Nielsen, Helena Skyt & Würtz, Allan, . "Self-Employment among Immigrants: A Last Resort?," Economics Working Papers 2003-13, School of Economics and Management, University of Aarhus.
  2. Constant, Amelie F. & Zimmermann, Klaus F., 2003. "The Dynamics of Repeat Migration: A Markov Chain Analysis," IZA Discussion Papers 885, Institute for the Study of Labor (IZA).
  3. Fairlie, Robert, 2014. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Santa Cruz Department of Economics, Working Paper Series qt24p7v6gc, Department of Economics, UC Santa Cruz.
  4. David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
  5. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
  6. 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.
  7. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  8. 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.
  9. David Blanchflower & A Oswald, 1993. "Entrepreneurship," CEP Discussion Papers dp0134, Centre for Economic Performance, LSE.
  10. George J. Borjas, 1986. "The Self-Employment Experience of Immigrants," NBER Working Papers 1942, National Bureau of Economic Research, Inc.
  11. Blanchflower, David G. & Oswald, Andrew & Stutzer, Alois, 2001. "Latent entrepreneurship across nations," European Economic Review, Elsevier, vol. 45(4-6), pages 680-691, May.
  12. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc.
  13. 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 315-41, August.
  14. Amelie Constant & Yochanan Shachmurove & Klaus F. Zimmermann, 2003. "What Makes an Entrepreneur and Does It Pay?: Native Men, Turks, and Other Migrants in Germany," Discussion Papers of DIW Berlin 386, DIW Berlin, German Institute for Economic Research.
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