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

54 Pages Posted: 9 Nov 2004 Last revised: 16 Apr 2023

See all articles by Amelie F. Constant

Amelie F. Constant

Princeton University; UNU-MERIT; CESifo; University of Pennsylvania

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

Abstract

Economically active people are either in gainful employment, are unemployed or selfemployed.We are interested in the dynamics of the transitions between these states acrossthe business cycle. It is generally perceived that employment or self-employment areabsorbing states. However, innovations, structural changes and business cycles generatestrong adjustment processes that lead to fluctuations between employment and selfemployment,directly or through the unemployment state. Migrants are more likely to besensitive to adjustment pressures than natives, since they have less stable jobs and choosemore often self-employment to avoid periods of unemployment. These issues areinvestigated using a huge micro data set generated from 19 waves of the German SocioeconomicPanel. The findings suggest that the conditional probabilities of entry into selfemploymentare more than twice as high from the status of unemployment as from the statusof employment. Self-employment is also an important channel back to regular employment.Business cycle effects strongly impact the employment transition matrix, and migrants take alarger part in the adjustment process. They use self-employment as a mechanism tocircumvent and escape unemployment and to integrate into the host country's labor market.

Keywords: business cycle, migration, self-employment, entrepreneurship, 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. IZA Discussion Paper No. 1386, Available at SSRN: https://ssrn.com/abstract=617402 or http://dx.doi.org/10.2139/ssrn.617402

Amelie F. Constant

Princeton University ( email )

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UNU-MERIT ( email )

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CESifo ( email )

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University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

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 )

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Maastricht, Limburg 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

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