Article Green Open Access 2005

Cash constraints and business start-ups: Deutschmarks versus dollars

HD
Holtz-Eakin, Douglas
 RH
Rosen, Harvey S.
Contributions to Economic Analysis and Policy
Journal · Vol. 4 · Issue 1
Abstract

In this paper we analyze microdata to explore differences in the rates at which American and German workers leave their salaried jobs to become self-employed. We document that the rate of self-employment is lower in Germany than in the United States, and the rate of transition from wage-earning to self-employment is lower as well. Our results suggest that German workers face liquidity constraints that are more severe than those of their American counterparts and an environment that discourages transitions to self-employment. The difference in transition rates cannot be attributed to observable differences between German and American workers. Copyright © 1999-2005 Internet-Journals, Inc. All rights reserved.

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Author Affiliations
Syracuse University, Syracuse, NY, United States
Princeton University, Princeton, NJ, United States
Funding & Acknowledgements
National Science Foundation, NSF
∗We are grateful to Donald Bruce and Rebecca Porcello for superb research assistance and to Esther Gray for preparing the manuscript. The National Science Foundation, The Center for Policy Research, and Princeton’s Center for Economic Policy Studies provided support. We thank Dan Black, Patrick Bolton, Donald Bruce, Stacy Dickert-Conlin, William Gentry, Friedhelm Pfeiffer, James Poterba, and members of Princeton’s Public Finance Working Group for useful suggestions.
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8 Effects of the United States Tax System on Transitions into Self Employment, (1999)
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10 Working Paper no 9710, (1997)
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