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Business Cycles, Unemployment and Entrepreneurial Entry: Evidence from Germany

Aufsätze referiert extern - Web of Science

Michael Fritsch, Alexander S. Kritikos, Katharina Pijnenburg

In: International Entrepreneurship and Management Journal 11 (2015), 2, S. 267-286


We investigate whether people are more willing to become self-employed during boom periods or during recessions and to what extent business cycles and 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, implying that it 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".

JEL-Classification: L26;E32
Keywords: Self-employment, Business cycle, Unemployment, Start-up