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AbstractGermany experienced a unique rise in the level of self-employment in the first two decades following unification. Applying the non-linear Blinder-Oaxaca decomposition technique, we find that the main factors driving these changes in the overall level of self-employment are demographic developments, the shift towards service sector employment, and a larger share of population holding a tertiary degree. While these factors explain most of the development in self-employment with employees and the overall level of self-employment in West Germany, their explanatory power is much lower for the stronger increase of solo self-employment and of self-employment in former socialist East Germany.
Keywords:Self-employment, non-linear Blinder-Oaxaca decomposition technique, entrepreneurship, Germany JEL classification: L26, D221 We are indebted to Adam Lederer, Simon Parker, Alexander Schiersch, and Michael Wyrwich for helpful comments on earlier versions of this paper. We are also grateful to the Research Data Centre of the Regional Statistical Office of Berlin and of Thuringia in Erfurt for on-site data access and for their support and cooperation.