Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France
David Sraer and
Journal of Finance, 2020, vol. 75, issue 3, 1247-1285
We evaluate the effect of downside insurance on self‐employment. We exploit a large‐scale reform of French unemployment benefits that insured unemployed workers starting businesses. The reform significantly increased firm creation without decreasing the quality of new entrants. Firms started postreform were initially smaller, but their employment growth, productivity, and survival rates are similar to those prereform. New entrepreneurs' characteristics and expectations are also similar. Finally, jobs created by new entrants crowd out employment in incumbent firms almost one‐for‐one, but have a higher productivity than incumbents. These results highlight the benefits of encouraging experimentation by lowering barriers to entry.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:75:y:2020:i:3:p:1247-1285
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