Start-Up Subsidies for the Unemployed: Long-Term Evidence and Effect Heterogeneity

Marco Caliendo and Steffen Künn ()

No 4790, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: evaluation; long-term effects; self-employment; effect heterogeneity; start-up subsidies (search for similar items in EconPapers)
JEL-codes: C14 H43 J68 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2010-02
New Economics Papers: this item is included in nep-ent, nep-lab and nep-ltv
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Citations: View citations in EconPapers (11)

Published - published in: Journal of Public Economics, 2011, 95 (3-4), 311-331

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Related works:
Journal Article: Start-up subsidies for the unemployed: Long-term evidence and effect heterogeneity (2011)
Journal Article: Start-up subsidies for the unemployed: Long-term evidence and effect heterogeneity (2011)
Working Paper: Start-up Subsidies for the Unemployed: Long-Term Evidence and Effect Heterogeneity (2010)
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