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Active labor market programs’ effects on entrepreneurship and unemployment

Catherine Laffineur (), Saulo Dubard Barbosa (), Alain Fayolle () and Emeran Nziali
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Catherine Laffineur: Université Côte d’Azur, GREDEG-CNRS
Saulo Dubard Barbosa: EM Lyon
Alain Fayolle: EM Lyon
Emeran Nziali: EM Lyon

Small Business Economics, 2017, vol. 49, issue 4, 889-918

Abstract: Abstract Many countries are turning to active labor market programs (ALMP) to increase individuals’ incentive to start a business and to reduce unemployment, but research on the effectiveness of such programs has produced mixed results and is still inconclusive at the macroeconomic level. This article examines the importance of ALMP targeted at entrepreneurship to explain cross-country differences in aggregate entrepreneurship rate. By using GEM data over the period 2002–2013 on OECD countries, our results show a positive impact of ALMP on the rate of necessity entrepreneurship but no significant effect on the rate of opportunity entrepreneurship. We further established that generous unemployment benefits reduce the positive outcome of ALMP on the aggregate rate of necessity entrepreneurship. Moreover, because most businesses started out of necessity do not create new jobs, we find that the economic spin-off of such programs in terms of unemployment reduction is very limited.

Keywords: Entrepreneurship; Active labor market programs; Start-up incentives; Unemployment benefits; Unemployment; M21; J65; H50 (search for similar items in EconPapers)
Date: 2017
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