How Sensitive Is the Business Ownership Rate to Unemployment Fluctuations? Evidence of Asymmetries in a Panel of 23 OECD Countries

In this article, we study if the ‘recession-push’ hypothesis, i.e. the relationship running from unemployment to entrepreneurship/self-employment is affected asymmetrically by country dynamic labor market conditions. To this end, we use a panel threshold regression model that allows the unemployment rate to have an asymmetric impact of the rate of entrepreneurship, in different regimes. Our estimates provide support for the existence of different responses of entrepreneurship/self-employment to unemployment, depending on the value of the deviation between the observed and natural rates of unemployment with a one-period lag – i.e., depending on the intensity of the unemployment problem – that is the threshold variable we use to account for asymmetries.

Mónica Carmona Arango
Emilio Congregado Ramírez de Aguilera
Antonio A. Golpe Moya y Jesús Iglesias Garrido
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