Self-employment and business cycle persistence: Does the composition of employment matter for economic recoveries?

Shapiro, Alan Finkelstein

doi:10.1016/j.jedc.2014.06.014

“…Possible examples include actual technological innovations that occur in formal markets but take time and resources to be acquired by informal ones; changes in …nancial conditions that only a¤ect formal …rms with access to capital markets; and changes in terms of trade or policy changes in the trade regulation that a¤ect more directly formal …rms that trade with the rest of the world. 14 On some dimensions, the assumptions we make are deliberately simple in order for the model to remain tractable. Some of them will be relaxed later on.…”

Section: Goodsmentioning

confidence: 99%

“…First, we empirically document the link between informal employment and business cycles. To do this we use a dataset of …ve alternative measures of informal employment Finkelstein (2012) explicitly model an informal sector in a dynamic general equilibrium setting. A comprehensive literature review is given in the Appendix.…”

Section: Introductionmentioning

confidence: 99%

Informal employment and business cycles in emerging economies: The case of Mexico

Fernández

¹

,

Meza

²

2015

Review of Economic Dynamics

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Terms of use: Documents inThe unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws. Copyright ©Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. This paper documents how informal employment in Mexico is countercyclical, lags the cycle and is negatively correlated to formal employment. This contributes to explaining why total employment in Mexico displays low cyclicality and variability over the business cycle when compared to Canada, a developed economy with a much smaller share of informal employment. To account for these empirical findings, a business cycle model is built of a small, open economy that incorporates formal and informal labor markets, and the model is calibrated to Mexico. The model performs well in terms of matching conditional and unconditional moments in the data. It also sheds light on the channels through which informal economic activity may affect business cycles. Introducing informal employment into a standard model amplifies the effects of productivity shocks. This is linked to productivity shocks being imperfectly propagated from the formal to the informal sector. It also shows how imperfect measurement of informal economic activity in national accounts can translate into stronger variability in aggregate economic activity. Cataloging-in-Publication JEL classifications: F41, F44

show abstract

“…Development of the economic growth of a country needs entrepreneurship to bring changes in the business trends (Abun, Foronda, Agoot, Belandres, & Magallanez, 2018). There are numerous explanations for why people involve in entrepreneurial activities (Klyver, Nielsen, & Evald, 2013) revealing the motives of individuals towards entrepreneurship (Shapiro, 2014). Entrepreneurial intentions are the starting point of the entrepreneurial process.…”

Section: Introductionmentioning

confidence: 99%

Impact of Need for Achievement on Entrepreneurial Intentions; Mediating Role of Self-Efficacy

Akhtar

¹

,

Hong-yuan

²

,

Iqbal

³

et al. 2020

Journal of Asian Business Strategy

View full text Add to dashboard Cite

Entrepreneurship is becoming very significant for the growth of economies since last decade. Therefore this study aimed to analyze the factors affecting the intentions of individuals towards entrepreneurial start-up so that economic growth can be increased. Entrepreneurial intentions are the vital component of actual business setups that need several personality traits to place ideas into actual actions. Hence the study constructed two personality traits that affect these intentions. The need for achievement and self-efficacy are significant variables to be analyzed in entrepreneurship while discussing the generating of new entrepreneurial businesses. A quantitative analysis was performed using Smart PLS on the collected data from 123 questionnaire responses provided by small and medium-size new entrepreneur startups. The findings reveal that the need for achievement and self-efficacy significantly affects the intentions of entrepreneurs (direct effects). Moreover, the study also explained that the need for achievement has a positive and significant impact on entrepreneurial intentions when mediated by self-efficacy behavior (indirect effect). The study provides theoretical concepts of the selected variables along with significant practical implications for entrepreneurial businesses.Contribution/ Originality: This study contributes to the literature by elaborating on the significance of entrepreneurial intentions and personality traits by analyzing the impact of the need for achievement and self-efficacy on entrepreneurial intentions. This study examines the direct and mediating roles to describe different dimensions of the variables.

show abstract

“…Finally, we note that recalibrating the model to bring the steady-state unemployment rate to exactly match a 5 percent rate implies that the volatility of unemployment becomes implausibly high. 16 A much lower value-consistent with particular industries-does not change the main results. 17 The resulting parameter values are: η r , ϕ k S , φ, σ z S , σ z SE , σ r = 20, 3.3, 0.55, 0.138, 0.02, 0.032 .…”

Section: Calibrated Parametersmentioning

confidence: 57%

“…We fix the capital search cost parameter, ψ SE , to obtain a cost of searching for capital suppliers equal to 3 months of wages, which is broadly in line with the estimated average startup costs of microenterprises in Mexico (McKenzie and Woodruff, 2006). 16 We set steady-state remittances to deliver a remittance-to-output ratio of 2.4 percent (Mandelman and Zlate, 2012). Finally, we jointly calibrate the sensitivity of remittances to output fluctuations, η r , the capital adjustment cost parameter, ϕ k S , the labor supply elasticity, φ, the standard deviation of the sectoral productivity shocks, σ z S , σ z SE , and the standard deviation of the remittance shock, σ r , to match the cyclical correlation between remittances and output (-0.38), the relative volatility of investment (2.78), the cyclical correlation between output and the population outside of the labor force (-0.157), the volatility of output (2.39), the persistence of output (0.846), and the cyclical correlation of output and the current-account-output ratio (-0.47).…”

Section: Calibrated Parametersmentioning

confidence: 99%

Remittances, Entrepreneurship, and Employment Dynamics Over the Business Cycle

Shapiro

¹

,

Mandelman

²

2014

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: We incorporate remittances and microentrepreneurship (self-employment) into a small openeconomy business cycle model with capital and labor market frictions. Countercyclical remittances moderate the decline of households' consumption during recessions. These remittances also are used to finance the start-up costs of microenterprises that bolster households' income during economic downturns. However, the positive income effect from countercyclical remittances also leads to a decrease in salaried labor supply, which generates offsetting upward pressure on wages during recessions and adversely affects the recovery of the salaried sector. Therefore, the behavior of remittances decisively affects labor force participation and the composition of employment between nonsalaried and salaried employment over the business cycle. The model delivers labor market and aggregate cyclical dynamics that are consistent with the Mexican data. Terms of use: Documents inJEL classification: E24, E32

show abstract

Self-employment and business cycle persistence: Does the composition of employment matter for economic recoveries?

Cited by 43 publications

References 51 publications

Informal employment and business cycles in emerging economies: The case of Mexico

Informal employment and business cycles in emerging economies: The case of Mexico

Impact of Need for Achievement on Entrepreneurial Intentions; Mediating Role of Self-Efficacy

Remittances, Entrepreneurship, and Employment Dynamics Over the Business Cycle

Contact Info

Product

Resources

About