Start-up subsidies for the unemployed: Long-term evidence and effect heterogeneity

Abstract

Turning unemployment into self-employment has become an increasingly important part of active labor market policies (ALMP) in many OECD countries. Germany is a good example where the spending on start-up subsidies for the unemployed accounted for nearly 17% of the total spending on ALMP in 2004. In contrast to other programs-like vocational training, job creation schemes, or wage subsidies-the empirical evidence on the effectiveness of such schemes is still scarce; especially regarding long-term effects and effect heterogeneity. This paper aims to close this gap. We use administrative and survey data from a large sample of participants in two distinct start-up programs and a control group of unemployed individuals. We find that over 80% of participants are integrated in the labor market and have relatively high labor income five years after start-up. Additionally, participants are much more satisfied with their current occupational situation compared to previous jobs. Based on conditional propensity score matching methods we estimate the long-term effects of the programs against non-participation. Our results show that both programs are effective with respect to income and employment outcomes in the long-run. Moreover, we consider effect heterogeneity with respect to several dimensions and show that start-up subsidies for the unemployed tend to be most effective for disadvantaged groups in the labor market.

Why should banks provide entrepreneurship training seminars?

“…Thus, we apply the 'powerful matching techniques' called for by Rideout and Gray (2013: 347) in order to obtain estimates of the effect of knowledge enhancement on firm performance on the one hand and on loyalty-raising on the other. Specifically, we utilise Propensity-Score Matching (PSM) to address causality concerns (Caliendo and Künn, 2011;Pons Rotger et al, 2012). Our central result is that seminar participation has no significant impact on the survival or sales growth of the enterprise, confirming other statistical work showing that management training provides little or no performance enhancement among new and small firms (Bryan, 2006;Georgiadis and Pitelis, 2014;Norrman and Bager-Sjögren, 2010).…”

Are active labour market policies effective in activating and integrating low-skilled individuals? An international comparison

“…Unfortunately, it is still far from clear what a correct representation of the policy reaction function is and it might well be the case that whatever the representation, it would not be the same across countries. Conscious of this problem, other efforts arose later using different definitions of the policy variables depending on the context and tackling the reverse causality issue mainly through fixed-effects estimators and instrumental variables (Büttner and Prey 1997;Schmid et al 2001;Estevão 2003;Bassanini and Duval 2006). Still, effects are mixed, and thus, the knowledge on the aggregate effects of ALMPs remains inconclusive.…”

Measuring the Costs and Coverage of SME and Entrepreneurship Policy: A Pioneering Study

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