Fine....I'll do it myself: lessons from self-employment grants in a long recession period

Stjepan Srhoj and Ivan Zilic ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper evaluates the effect of a self-employment grant scheme for unemployed individuals-designed to ease the first 12 months of business operation-on firm growth, survival, and labor market reintegration in Croatia in the 2010-2017 period. Grants offered a moderate amount of finances (up to 50% of average annual gross salary) and absorbed only 5% of funds allocated to active labor market policies (ALMPs), but accounted for 10% of new firms opened throughout the years. We contribute to the literature on self-employment grants with several novel findings. Exploiting the longitudinal structure of the unemployment episodes dataset, we find that individuals who finish their spell with a grant have a significantly lower probability of returning to unemployment. The policy is particularly effective for individuals who would have otherwise had labor market opportunities (men, more educated, prime-age workers, previously employed), individuals who became unemployed after inactivity and lost their job due to a firm's closure-which demonstrates that self-employment subsidies can be effective in ameliorating unemployment. However, the policy was not effective for longer unemployed individuals. At the firm level, we find descriptive evidence that limited liability firms opened via a grant have lower growth potential and worse survival profile, while unlimited liability firms-even though a sizable portion of them closes after a required 12-month grant period-have a more favorable survival profile. Finally, we also find that the effectiveness of these grants has increased throughout the years, indicating toward the direction of institutional learning.

Keywords: evaluation; firm performance; self-employment grant; unemployment (search for similar items in EconPapers)
JEL-codes: J01 N0 R14 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2021-06-19
New Economics Papers: this item is included in nep-eur, nep-sbm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in IZA Journal of Labor Policy, 19, June, 2021, 11(1), pp. 413 - 424. ISSN: 2193-9004

Downloads: (external link)
http://eprints.lse.ac.uk/110998/ Open access version. (application/pdf)

Related works:
Journal Article: “Fine...I’ll do it myself”: Lessons from self-employment grants in a long recession period (2021)
Working Paper: "Fine...I'll do it myself": Lessons from self-employment grants in a long recession period (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:110998

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