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Do you dare? The effect of economic conditions on entrepreneurship among college graduates

Hendrik Beiler

Labour Economics, 2017, vol. 47, issue C, 64-74

Abstract: I estimate the effect of economic conditions on the decision to enter entrepreneurship after graduation from college. I proxy for economic conditions at the field of study level, constructed from industry growth rates which I map to fields of study using the average industry - college major distribution. This setup allows controlling for unobserved differences between graduation cohorts such as technological change or shifts in cohort composition. Based on German survey data, I find that a one percentage point increase in field-specific 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 years after graduation. Exit from entrepreneurship decreases slightly when economic conditions at graduation improve. Taken together, my 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.

Keywords: Entrepreneurship; Higher education; Occupational choice; Firm entry (search for similar items in EconPapers)
JEL-codes: L26 I23 J23 J24 M13 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.labeco.2017.05.003

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