Self-Employment and Business Cycles: looking for asymmetries in a panel of 23 OECD countries

Zusammenfassung

The aim of this work is to identify whether the bidirectional relationship between entrepreneurship cycles and output gap is asymmetric depending on the business cycle phase. To this end we employ a panel threshold regression model in which different relations can prevail in each regime defined by the values of the threshold variable. Maybe the lack of conclusive evidence have had its origin in that the assumption of symmetric responses has been the predominantly approach. The findings of this article shed new light on this debate, qualifying previous empirical results. In particular, our estimates provide support to the existence of different responses �both in terms of sign and magnitude- of cyclical self-employment to output growth and of output growth to cyclical self-employment, depending on the value of the deviation between the observed and natural rate of self-employment one period lagged, which is the threshold variable. The result is extremely important for policy makers and practitioners given that whether they ignore the asymmetric impact that an entrepreneurship promotion policy action might have on the real economy, the action might lead in non-expected effects.