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Turning Unemployment into Self-Employment: Effectiveness and Efficiency of Two Start-Up Programmes

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  • Hans J. Baumgartner
  • Marco Caliendo

Abstract

Turning unemployment into self-employment has become a major focus of German active labour market policy (ALMP) in recent years. If effective, this would not only reduce Germany's persistently high unemployment rate, but also increase its notoriously low self-employment rate. Empirical evidence on the effectiveness of such programmes is scarce. The contribution of the present paper is twofold: first, we evaluate the effectiveness of two start-up programmes for the unemployed. Our outcome variables include the probability of being employed, the probability of being unemployed, and personal income. Second, based on the results of this analysis, we conduct an efficiency analysis, i.e., we estimate whether the Federal Employment Agency has saved money by placing unemployed individuals in these programmes. Our results show that at the end of the observation period, both programmes are effective and one is also efficient. The considerable positive effects present a stark contrast to findings from evaluations of other German ALMP programmes in recent years. Hence, ALMP programmes aimed at moving the unemployed into self-employment may prove to be among the most effective, both in Germany and elsewhere

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 671.

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Length: 36 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp671

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Keywords: Start-up subsidies; evaluation; effectiveness; efficiency; self-employment;

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References

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  1. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2004. "Evaluating the Impact of Education on Earnings in the UK: Models, Methods and Results from the NCDS," CEE Discussion Papers, Centre for the Economics of Education, LSE 0047, Centre for the Economics of Education, LSE.
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  5. Alberto Abadie & Guido W. Imbens, 2006. "On the Failure of the Bootstrap for Matching Estimators," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0325, National Bureau of Economic Research, Inc.
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  7. Begona Cueto & Javier Mato, 2006. "An analysis of self-employment subsidies with duration models," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(1), pages 23-32.
  8. Black, Dan A. & Smith, J.A.Jeffrey A., 2004. "How robust is the evidence on the effects of college quality? Evidence from matching," Journal of Econometrics, Elsevier, Elsevier, vol. 121(1-2), pages 99-124.
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  10. Jeffrey Smith & Petra Todd, 2003. "Does Matching Overcome Lalonde's Critique of Nonexperimental Estimators?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers, University of Western Ontario, CIBC Centre for Human Capital and Productivity 20035, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  11. Jose C. GALDO & Jeffrey SMITH & Dan BLACK, 2008. "Bandwidth Selection and the Estimation of Treatment Effects with Unbalanced Data," Annales d'Economie et de Statistique, ENSAE, issue 91-92, pages 189-216.
  12. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 12 Feb 2014.
  13. Caliendo, Marco & Hujer, Reinhard & Thomsen, Stephan L., 2005. "The Employment Effects of Job Creation Schemes in Germany: A Microeconometric Evaluation," IZA Discussion Papers 1512, Institute for the Study of Labor (IZA).
  14. Nigel Meager & Peter Bates & Marc Cowling, 2003. "An Evaluation of Business Start-Up Support for Young People," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 186(1), pages 59-72, October.
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