Unemployment, Entrepreneurship and Firm Outcomes

Joao Galindo da Fonseca

No 04-2019, Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: Are there differences between firms created by unemployed individuals relative to otherwise identical employed individuals? The answer is crucial for understanding the impact of policies that promote entrepreneurship among the unemployed. I develop an equilibrium model of entrepreneurship. Different outside options imply the unemployed are more likely to start firms, but these are smaller and fail more often. I verify these implications using a new administrative Canadian matched owner-employer-employee dataset. I use firm closures to identify random assignments of individuals to unemployment. I find that subsidies for firms started by the unemployed induce a reallocation of resources to low-productivity firms. The mechanism is further tested empirically by verifying that wage workers are more responsive to wages than the unemployed in their decision to start a firm.

Keywords: firm dynamics; unemployment; macroeconomics; labor markets (search for similar items in EconPapers)
JEL-codes: E23 E24 J63 J64 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-bec, nep-mac and nep-sbm
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Related works:
Journal Article: Unemployment, Entrepreneurship and Firm Outcomes (2022)
Working Paper: Unemployment, entrepreneurship and firm outcomes (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:04-2019

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