Why Did Self-Employment Increase so Strongly in Germany?
40 Pages Posted: 14 Feb 2015
Germany experienced a unique rise in the level of self-employment in the first two decades following unification. Applying the non-linear Blinder-Oaxaca decomposition technique, we find that the main factors driving these changes in the overall level of self-employment are demographic developments, the shift towards service sector employment, and a larger share of population holding a tertiary degree. While these factors explain most of the development in self-employment with employees and the overall level of self-employment in West Germany, their explanatory power is much lower for the stronger increase of solo self-employment and of self-employment in former socialist East Germany.
Keywords: self-employment, non-linear Blinder-Oaxaca decomposition technique, entrepreneurship, Germany
JEL Classification: L26, D22
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