Employment Stability of Entrants in Newly Founded Firms: A Matching Approach Using Linked Employer-Employee Data from Germany

Abstract

Using a linked employer-employee dataset and taking the perspective of individuals rather than firms, this paper analyzes some effects of joining start-ups. We show that entrants in new firms differ from those joining incumbent firms, and we use a matching approach to compare a group of employees joining new firms in 1995/96 with a control group entering incumbent firms. Our results indicate that individuals' employment stability was higher in incumbent than in newly founded firms while their risk of becoming unemployed was lower. In particular in eastern Germany, joining firms that were older than six years was the best strategy.

Keywords: linked employer-employee data, newly founded firms, unemployment, employment, Germany

JEL Classification: J63, J64