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Unemployment and Business Formation Rates: Reconciling Time-Series and Cross-Section Evidence

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  • R T Hamilton

    (Department of Business Administration, University of Canterbury, Christchurch 1, New Zealand)

Abstract

Time-series analyses generally show rates of business formation increasing with unemployment. In cross-section studies the areas with the highest rates of formation are generally those with the lowest levels of unemployment. In a study using both types of data, the negative cross-section relationship is confirmed but it is suggested that the time-series may be nonlinear, becoming negative at a critical unemployment level around 20%. The paper concludes with a reconciliation of these findings.

Suggested Citation

  • R T Hamilton, 1989. "Unemployment and Business Formation Rates: Reconciling Time-Series and Cross-Section Evidence," Environment and Planning A, , vol. 21(2), pages 249-255, February.
    • Handle: RePEc:sae:envira:v:21:y:1989:i:2:p:249-255
    DOI: 10.1068/a210249
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    Cited by:

    1. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.
    2. José María Millán & Emilio Congregado & Concepción Román, 2010. "Determinants of Self-Employment Dynamics and their Implications on Entrepreneurial Policy Effectiveness," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 72, pages 45-76.
    3. Giacomin, Olivier & Janssen, Frank & Guyot, Jean-luc & Lohest, Olivier, 2011. "Opportunity and/or necessity entrepreneurship? The impact of the socio-economic characteristics of entrepreneurs," MPRA Paper 29506, University Library of Munich, Germany.
    4. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    5. Ritsila, Jari & Tervo, Hannu, 2002. "Effects of Unemployment on New Firm Formation: Micro-level Panel Data Evidence from Finland," Small Business Economics, Springer, vol. 19(1), pages 31-40, August.
    6. George Saridakis & Anne-Marie Mohammed & Jesús M. García-Iglesias & Rebeca I. Muñoz Torres, 2018. "Economy and Divorces: Their Impact Over Time on the Self-Employment Rates in Spain," Journal of Family and Economic Issues, Springer, vol. 39(3), pages 422-435, September.
    7. Shaoming Cheng & Huaqun Li, 2010. "The effects of unemployment on new firm formation revisited: Does space matter?," Regional Science Policy & Practice, Wiley Blackwell, vol. 2(2), pages 97-120, November.
    8. Quatraro, Francesco & Vivarelli, Marco, 2013. "Entrepreneurship In A Developing Country Context," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201314, University of Turin.
    9. Abubakar S. Garba, 2017. "Promoting Entrepreneurship Amidst Poverty and Unemployment: The Role of Nigerian Educational Policies," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 7(8), pages 684-695, August.
    10. Schanne, Norbert & Weyh, Antje, 2009. "What makes start-ups out of unemployment different?," IAB-Discussion Paper 200904, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Hannu Tervo, 2006. "Regional unemployment, self-employment and family background," Applied Economics, Taylor & Francis Journals, vol. 38(9), pages 1055-1062.
    12. Marco Vivarelli, 2012. "Entrepreneurship and Post-Entry Performance: the Microeconomic Evidence," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1286, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    13. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1453-1495, December.
    14. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    15. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute of Labor Economics (IZA).
    16. Dawson, Christopher & Henley, Andrew & Latreille, Paul L., 2009. "Why Do Individuals Choose Self-Employment?," IZA Discussion Papers 3974, Institute of Labor Economics (IZA).
    17. Francesco Quatraro & Marco Vivarelli, 2013. "Entry and Post-Entry Dynamics in Developing Countries," GREDEG Working Papers 2013-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.

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