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The Post-Reform Effectiveness of the New German Start-Up Subsidy for the Unemployed

Author

Listed:
  • Bellmann, Lutz

    (Institute for Employment Research (IAB), Nuremberg)

  • Caliendo, Marco

    (University of Potsdam)

  • Tübbicke, Stefan

    (Institute for Employment Research (IAB), Nuremberg)

Abstract

Start-up subsidies for the unemployed have long been an important active labor market policy strategy in Germany. The current subsidy program underwent a major reform in 2011 that changed its key parameters: support was lowered, eligibility criteria were tightened and entitlement was abandoned by granting caseworkers the right to reject applications. Ex-ante predictions on the post-reform effectiveness of the program are ambiguous, and knowledge about the importance of institutional details of such a program is very limited, making a new evaluation necessary. In our descriptive analysis, we compare personal and business characteristics of participants before and after the reform and we find significant differences in terms of gender composition, educational attainment and industry-specific experience. Post-reform participants also perform better in terms of subsequent labor market integration and show signs of higher commitment. These findings give us some indication for interpreting our estimates of causal effects of the post-reform program. We find that for both men and women, employment and income effects of the post-reform program are positive, sizable, and larger than what was estimated for the pre-reform program. All in all, the programs effectiveness seems to have improved through the reform. Potential reasons for this are discussed and include better screening of participants by caseworkers, higher rates of commitment and changes in macroeconomic conditions.

Suggested Citation

  • Bellmann, Lutz & Caliendo, Marco & Tübbicke, Stefan, 2017. "The Post-Reform Effectiveness of the New German Start-Up Subsidy for the Unemployed," IZA Discussion Papers 11055, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp11055
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    Cited by:

    1. Marco Caliendo & Stefan Tübbicke, 2020. "New evidence on long-term effects of start-up subsidies: matching estimates and their robustness," Empirical Economics, Springer, vol. 59(4), pages 1605-1631, October.
    2. Caliendo, Marco & Tübbicke, Stefan, 2021. "Design and effectiveness of start-up subsidies: Evidence from a policy reform in Germany," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 333-340.
    3. Caliendo, Marco & Tübbicke, Stefan, 2019. "Do Start-Up Subsidies for the Unemployed Affect Participants' Well-Being? A Rigorous Look at (Un-)Intended Consequences of Labor Market Policies," IZA Discussion Papers 12755, Institute of Labor Economics (IZA).
    4. Caliendo, Marco & Künn, Steffen & Weissenberger, Martin, 2020. "Catching up or lagging behind? The long-term business and innovation potential of subsidized start-ups out of unemployment," Research Policy, Elsevier, vol. 49(10).
    5. Tobias Brändle & Lukas Fervers, 2021. "Give it Another Try: What are the Effects of a Job Creation Scheme Especially Designed for Hard-to-Place Workers?," Journal of Labor Research, Springer, vol. 42(3), pages 382-417, December.

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    More about this item

    Keywords

    matching; policy reform; start-up subsidies; effect heterogeneity;
    All these keywords.

    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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