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

54 Pages Posted: 9 Nov 2004

See all articles by Amelie F. Constant

Amelie F. Constant

Princeton University; UNU-MERIT; CESifo

Klaus F. Zimmermann

Global Labor Organization (GLO); UNU-MERIT; Maastricht University, Department of Economics; Free University Berlin; University of Bonn; Centre for Economic Policy Research (CEPR); Journal of Population Economics

Date Written: November 2004

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 Socio-economic 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.

Keywords: self-employment, entrepreneurship, business cycle, migration, Markov chain analysis

JEL Classification: E32, J23, J61, M13

Suggested Citation

Constant, Amelie F. and Zimmermann, Klaus F., Self-Employment Dynamics Across the Business Cycle: Migrants Versus Natives (November 2004). Available at SSRN: https://ssrn.com/abstract=617402

Amelie F. Constant

Princeton University ( email )

189 Wallace Hall
Princeton, NJ 08544
United States

HOME PAGE: http://opr.princeton.edu/visitors/

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

HOME PAGE: http://www.merit.unu.edu/about-us/profile/?staff_id=2419

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo-group.de/ifoHome/research/Network/Members.html

Klaus F. Zimmermann (Contact Author)

Global Labor Organization (GLO) ( email )

Bonn
Germany

HOME PAGE: http://https://glabor.org/

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

Maastricht University, Department of Economics ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

University of Bonn

Postfach 2220
Bonn, D-53012
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Journal of Population Economics

Tiergartenstr. 17
D-69121 Heidelberg
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
139
Abstract Views
997
rank
227,023
PlumX Metrics