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Business Cycles, Unemployment and Entrepreneurial Entry: Evidence from Germany

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  • Fritsch, Michael

    (University of Jena)

  • Kritikos, Alexander S.

    (DIW Berlin)

  • Pijnenburg, Katharina

    (DIW Berlin)

Abstract

We investigate whether people are more willing to become self-employed during boom periods or during recessions and to what extent business cycles or unemployment levels influence entries into entrepreneurship. Our analysis for Germany reveals that there is a positive relationship between unemployment rates and start-up activities. Moreover, new business formation is higher during recessions than in boom periods. This implies that new business formation is counter-cyclical. When disentangling periods of low and high unemployment we find that the effect of unemployment on new business formation is only statistically significant if the level of unemployment is below the trend, indicating a "low unemployment retain effect".

Suggested Citation

  • Fritsch, Michael & Kritikos, Alexander S. & Pijnenburg, Katharina, 2013. "Business Cycles, Unemployment and Entrepreneurial Entry: Evidence from Germany," IZA Discussion Papers 7852, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7852
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    Cited by:

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    3. Ondřej Dvouletý, 2017. "Relationship Between Unemployment and Entrepreneurship Dynamics in the Czech Regions: a Panel VAR Approach," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 65(3), pages 987-995.
    4. Kay, Rosemarie & Kranzusch, Peter & Nielen, Sebastian, 2022. "Auswirkungen der Corona-Pandemie auf das gewerbliche Gründungsgeschehen 2020: Eine regionale Analyse," Daten und Fakten 29, Institut für Mittelstandsforschung (IfM) Bonn.
    5. Fairlie, Robert W & Fossen, Frank M, 2018. "Opportunity Versus Necessity Entrepreneurship: Two Components of Business Creation," Santa Cruz Department of Economics, Working Paper Series qt0rd0g01g, Department of Economics, UC Santa Cruz.
    6. Catalina Amuedo-Dorantes & Magnus Lofstrom & Chunbei Wang, 2022. "Immigration Policy and the Rise of Self-Employment among Mexican Immigrants," ILR Review, Cornell University, ILR School, vol. 75(5), pages 1189-1214, October.
    7. Alina Sorgner & Michael Fritsch, 2018. "Entrepreneurial career paths: occupational context and the propensity to become self-employed," Small Business Economics, Springer, vol. 51(1), pages 129-152, June.
    8. José Miguel Giner & María Jesús Santa-María & Antonio Fuster, 2017. "High-growth firms: does location matter?," International Entrepreneurship and Management Journal, Springer, vol. 13(1), pages 75-96, March.
    9. Kay, Rosemarie & Günterberg, Brigitte, 2015. "Existenzgründungen von ausländischen Staatsbürgern," Daten und Fakten 15, Institut für Mittelstandsforschung (IfM) Bonn.
    10. Jaeyeob Jeong & Myeonggil Choi, 2017. "The Expected Job Satisfaction Affecting Entrepreneurial Intention as Career Choice in the Cultural and Artistic Industry," Sustainability, MDPI, vol. 9(10), pages 1-16, September.
    11. Michael Fritsch & Alexander S. Kritikos, 2016. "Entrepreneurship and the Business Cycle," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(3), pages 24-28, October.
    12. Lechman, Ewa & Dominiak, Piotr, 2016. "Entrepreneurship vulnerability to business cycle. A new methodology for identification pro-cyclical and counter-cyclical patterns of entrepreneurial activity," MPRA Paper 68793, University Library of Munich, Germany.
    13. Mohammadi, H. & Abolhasani, L. & Shahnoushi, N. & Shabanian, F., 2018. "The effects of business cycle indicators on stock market indices of food industry in Iran," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277425, International Association of Agricultural Economists.
    14. Inmaculada Buendía-Martínez & Agustín Álvarez-Herranz & Mercedes Moreira Menéndez, 2020. "Business Cycle, SSE Policy, and Cooperatives: The Case of Ecuador," Sustainability, MDPI, vol. 12(13), pages 1-20, July.
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    16. Kay, Rosemarie & Günterberg, Brigitte, 2019. "Existenzgründungen von Frauen: Aktuelle Entwicklungen," Daten und Fakten 24, Institut für Mittelstandsforschung (IfM) Bonn.

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    More about this item

    Keywords

    start-up; self-employment; business cycle; unemployment;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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