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Accessible Unlicensed Requires Authentication Published by De Gruyter February 3, 2005

Cash Constraints and Business Start-Ups: Deutschmarks Versus Dollars

Douglas Holtz-Eakin and Harvey S Rosen

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.

Published Online: 2005-2-3

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