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Self-Employment - a Way to End Unemployment? Empirical Evidence from German Pseudo-Panel Data

Discussion Papers 661, 24 S.

Daniela Glocker, Viktor Steiner

2007. Jan.

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This paper contributes to the policy-relevant question whether self-employment is a way out of (long-term) unemployment. We estimate the relationship between the entry rate into self-employment and previous (long-term) unemployment on the basis of pseudo-panel data for Germany in the period 1996-2002. The estimation method accounts for cohort fixed effects and measurement errors induced by the pseudo panel structure. We find that previous (long-term) unemployment significantly increases entry rates into self-employment for both men and women. These effects are quantitatively important, both in absolute terms and compared to other potential determinants of self-employment transitions, such as age, the level of vocational qualification and certain household characteristics.

JEL-Classification: J23;J64;C35
Keywords: self-employment, entrepreneurship, entry rate, start-ups, unemployment, pseudo-panel, age and cohort effects
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