Title: The impact of labour market regulations on (potential) entrepreneurs: the case of Germany

Authors: Petra Moog, Uschi Backes-Gellner

Addresses: Institute of Strategy and Business Economics (ISU), Zurich University, Plattenstrasse 14, CH 8032, Zurich. ' Institute of Strategy and Business Economics (ISU), Zurich University, Plattenstrasse 14, CH 8032, Zurich

Abstract: This paper explores the impact of German labour market regulations on the willingness of labour market entrants to start their own business. We study the legal situation, the actual and the perceived constraints imposed on businesses as well as the actual flexibility available of start-ups. We find strong evidence that labour market regulations are often misperceived in Germany. Furthermore, these misperceptions distort the willingness to become selfemployed. Start-ups are de jure hardly affected by labour market regulations because of a large number of exemptions. They are able to use a number of flexibility measures and thereby avoid regulatory restrictions. However, perceptions are quite the opposite, particularly in legal areas with high media coverage. This leads to a strong reluctance of labour market entrants to consider a start-up. Thus, measures aiming at increasing entrepreneurship should place strong emphasis on accurate knowledge of regulatory constraints and particularly in Germany, on less sceptical media coverage.

Keywords: entrepreneurship; labour market regulations; regulation perceptions; occupational choice; Germany; start-ups; law; constraints; flexibility; self-employed; media coverage; new ventures.

DOI: 10.1504/IJEIM.2009.024674

International Journal of Entrepreneurship and Innovation Management, 2009 Vol.10 No.1, pp.53 - 70

Published online: 15 Apr 2009 *

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