Beiler, Hendrik
(2018).
Essays on the Economics of Entrepreneurship.
PhD thesis, Universität zu Köln.
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Abstract
In my thesis I provide quasi-experimental evidence on two determinants of entry into entrepreneurship. Recent evidence points towards persistent negative effects of adverse aggregate economic conditions at birth for the initial size and subsequent growth of firm cohorts (Moreira, Sara. 2016. “Firm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles.”; Sedlacek, Petr, and Vincent Sterk. 2017. “The Growth Potential of Startups over the Business Cycle.” American Economic Review, 107(10): 3182–3210). One factor which may shape this pattern are systematic differences in the quality of firms entering during expansions and recessions. Yet, robust empirical evidence on the influence of economic conditions on the decision to engage in entrepreneurship is scarce. In chapter one (Published as Beiler, Hendrik. 2017. “Do You Dare? The Effect of Economic Conditions on Entrepreneurship among College Graduates.” Labour Economics, 47: 64–74) I set up a quasi-experimental research design to estimate the effect of economic conditions on entry into entrepreneurship. I investigate college graduates’ decision to become entrepreneurs in the first few years after graduation. I proxy for economic conditions at the field of study level. I construct the growth proxy from industry growth rates which I map to fields of study using the industry - college major distribution. This setup allows controlling for unobserved differences between graduation cohorts such as shifts in cohort composition. Based on the German Micro Census, I find that a one percentage point increase in employment growth in the year of graduation raises entry into entrepreneurship by about 30% in the first year after graduation. The effect halves in the second year and is close to zero in the third and fourth year after graduation. Taken together, the results imply that “lucky” graduation cohorts are persistently more likely to engage in entrepreneurship than “recessionary” cohorts, at least during the first four years after graduation that I examine. Chapters two and three (Chapters two and three are part of joint work with Susanne Prantl) investigate the effect of firm entry restrictions on entrepreneurship. The role of entry restrictions in shaping firm entry, industry dynamics and job creation attracts substantial interest from economists, policy makers and the general public alike. For example, product market regulation has been recently considered as a potential contributor to a secular decline entrepreneurship and business dynamism in the U.S (Decker, Ryan, John Haltiwanger, Ron Jarmin, and Javier Miranda. 2014. “The Role of Entrepreneurship in US Job Creation and Economic Dynamism.” Journal of Economic Perspectives, 28(3): 3–24). We base our investigation on a reform to a substantial entry restriction, the German Trade and Crafts Code (GTCC). Up to the reform, it imposed a mandatory standard on potential entrants in a specific set of affected product markets. The reform abolished the master craftsman certificate as a mandatory standard. This lead to a substantial decrease in entry costs in some product markets, while others remained unaffected. In chapter two we make use of the reform of the GTCC to estimate its effect on the decision to enter entrepreneurship and on the composition of entrepreneurs. Based on comprehensive survey data, we implement a difference-in-differences approach which compares changes in outcome variables over time in product markets with different deregulation intensities. We find a strong positive effect of the reform on entry into self-employment, which is mostly driven by solo-entrepreneurs. Interestingly, we find no change in the entrants’ level of general education in consequence of the abolished mandatory standard for entry. Entrepreneurs’ schooling has been found to be a predictor of future entrepreneurial success (Hombert, Johan, Antoinette Schoar, David Alexandre Sraer, and David Thesmar. 2019. “Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France.” HEC Paris Research Paper No. FIN-2013-1020). To investigate the effects of the deregulation reform on the longevity and propensity to hire of the new establishments, as well as effects on incumbent establishments, we turn to administrative establishment level panel data in chapter three. We find a substantial increase in the number of new establishments, which confirms the individual-level result on entry into entrepreneurship from chapter two. We further estimate that the new establishments are similarly stable. However, the new establishments are more likely to start with only one employee (rather than two or more). Finally, we show that due to the reform, small incumbents tend to be more likely to shrink and fail. This result points towards increased within industry factor reallocation.
| Item Type: | Thesis (PhD thesis) | ||||||||
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| URN: | urn:nbn:de:hbz:38-101770 | ||||||||
| Date: | 12 December 2018 | ||||||||
| Language: | English | ||||||||
| Faculty: | Faculty of Management, Economy and Social Sciences | ||||||||
| Divisions: | Weitere Institute, Arbeits- und Forschungsgruppen > Staatswissenschaftliches Seminar | ||||||||
| Subjects: | Economics | ||||||||
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| Date of oral exam: | 12 December 2018 | ||||||||
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| Refereed: | Yes | ||||||||
| URI: | http://kups.ub.uni-koeln.de/id/eprint/10177 |
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