The Relationship between Entrepreneurship and Unemployment in the Business Cycle

Title: The Relationship between Entrepreneurship and Unemployment in the Business Cycle
Issue: Vol. 3, No 1, 2010
Published date: 20-05-2010 (print) / 20-05-2010 (online)
Journal: Journal of International Studies
ISSN: 2071-8330, eISSN: 2306-3483
Authors: Aleksandra Gaweł
Keywords: entrepreneurship, entrepreneurial motivation, occupational choice, business cycle.
DOI: 10.14254/2071-8330.2010/3-1/7
Language: English
Pages: 59-69 (11)
JEL classification: E32

Connections between the situation in the labour market and entrepreneurship are of at least two kinds. Firstly, the situation on the labour market, especially connected with unemployment, is often treated as negative motivation for entrepreneurial undertakings according to recessional push theory. Secondly, labour is one of the production factors, so paid workers influence entrepreneurship through the possibility of enterprise growth. To investigate this relationship, entrepreneurs are divided into two groups, self-employed persons (entrepreneurs without any workers), and proper entrepreneurs (entrepreneurs who employ paid workers). The context of business cycle as time perspective is used. Two hypotheses are tested. Firstly, the cyclical changes in activity of self-employment and proper entrepreneurship react differently on the fluctuations in reference cycle, the fluctuations of self-employment are countercyclical, and the fluctuations of proper entrepreneurship are procyclical. Secondly, the cyclical changes of unemployment and wages influence on the fluctuations of self-employment as negative motivation while on the fluctuations of proper entrepreneurship as production factor. These hypotheses received positive verification based on time series for Poland, covering the years 1993-2009.