The Impact of Labour Market Regulations on Entrepreneurship: The Case of Germany

25 Pages Posted: 29 Mar 2006

See all articles by Petra M. Moog

Petra M. Moog

University of Siegen - Dept. of Entrepreneurship and Business Sucession; University of Zurich - Department of Business Administration (IBW)

Uschi Backes-Gellner

University of Zurich - Institute for Business Administration; Swiss Leading House

Date Written: September 2005

Abstract

This paper explores the impact of German labour market regulations on the willingness of young labour market entrants to start their own business rather than just becoming an employee. We study the legal situation, the actual and perceived constraints imposed on businesses and the actual flexibility available to young/small businesses. We find strong evidence that labour market regulations are often misperceived in Germany and that these misperceptions distort the willingness to become self-employed. Start-ups are de jure hardly affected by labour market regulations because of a large number of exemptions for small businesses and they are able to use a number of functional flexibility measures and thereby avoid regulatory restrictions, but perceptions are quite the opposite, particularly in legal areas with high media coverage. This leads to a strong reluctance to consider starting a business at a very early stage. Thus, measures aiming at increasing entrepreneurship should place strong emphasis on accurate knowledge of regulatory constraints and, particularly in Germany less sceptical media coverage.

Keywords: Entrepreneurship, labour market regulation, perception of regulations, occupational choice

JEL Classification: M13, M59, M21

Suggested Citation

Moog, Petra M. and Backes-Gellner, Uschi, The Impact of Labour Market Regulations on Entrepreneurship: The Case of Germany (September 2005). Available at SSRN: https://ssrn.com/abstract=893043 or http://dx.doi.org/10.2139/ssrn.893043

Petra M. Moog (Contact Author)

University of Siegen - Dept. of Entrepreneurship and Business Sucession ( email )

Hölderlinstraße 3, HA 4106
Siegen, 57068
Germany

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

Uschi Backes-Gellner

University of Zurich - Institute for Business Administration ( email )

Plattenstrasse 14
8032 Zurich
Switzerland
+41 44 6344281 (Phone)
+41 44 6344370 (Fax)

Swiss Leading House ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

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