Tuesday, March 31, 2009

Entrepreneurial Spirit During Downturns

Catherine Rampell, in a good post at Economix, writes:
There isn’t a terribly obvious relationship between the business cycle and self-employment rates. The percentage of workers who are self-employed seems to go up during recessions — but it also goes up sometimes during expansions, too.

[...] Professor [Robert W.] Fairlie explains that whether during a boom or a bust, there are two competing forces urging people toward or away from self-employment. One is opportunity: how much demand there is in the world for the good or service your new company would offer. The other is opportunity cost: what you’d be giving up by starting your own business.

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