From Unemployment to Self-Employment: An Evaluation of Self-Employment Assistance Programs

Alexandre Gaillard and Sumudu Kankanamge

Journal of Labor Economics, 2026, vol. 44, issue 1, 309 - 349

Abstract: This paper evaluates self-employment assistance (SEA) programs, which are government initiatives extending the unemployment insurance system to support unemployment to self-employment transitions. Using a general equilibrium model of the US labor market, we show that these programs have important labor market mobility effects and increase the self-employment rate. They also significantly impact the composition and performance outcomes of self-employment: while lump-sum subsidies select low-skilled individuals, SEA programs contingent on previously employed earnings select skilled and wealthier individuals. At the aggregate level, the latter programs mainly reallocate individuals from employment to self-employment, leaving the unemployment rate largely unaffected.

Date: 2026
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