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Stopping start-ups: how the business cycle affects entrepreneurship

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  • Yu, Li
  • Orazem, Peter F.
  • Jolly, Robert W.

Abstract

This study analyzes whether economic conditions at the time of labor market entry affect entrepreneurship, using difference in business start-ups between cohorts of college students graduating in boom or bust economic conditions. Those graduating during an economic bust tend to delay their business start-ups relative to boom period graduates by about two years. Our results are consistent with additional findings that higher unemployment rates at time of graduation significantly delay the first business start-up across all college graduation cohorts over the 1982-2004 period. The adverse effect of a bust is temporary, delaying but not preventing self-employment over the life-cycle.

Suggested Citation

  • Yu, Li & Orazem, Peter F. & Jolly, Robert W., 2009. "Stopping start-ups: how the business cycle affects entrepreneurship," ISU General Staff Papers 200907030700001139, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:200907030700001139
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    Cited by:

    1. Bukstein Daniel & Gandelman Nestor, 2018. "Cohort, Age and Business Cycle Effects in Entrepreneurship in Latin America," Entrepreneurship Research Journal, De Gruyter, vol. 8(3), pages 1-13, July.
    2. Per Davidsson & Scott R. Gordon, 2016. "Much Ado about Nothing? The Surprising Persistence of Nascent Entrepreneurs through Macroeconomic Crisis," Entrepreneurship Theory and Practice, , vol. 40(4), pages 915-941, July.
    3. Evila Piva & Massimiliano Guerini, 2023. "The impact of the COVID-19 pandemic and pandemic-related policies on new firm creation: an analysis of the Italian case," Small Business Economics, Springer, vol. 60(3), pages 1009-1031, March.

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    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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