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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

Suggested Citation

  • Hans J. Baumgartner & Marco Caliendo, 2007. "Turning Unemployment into Self-Employment: Effectiveness and Efficiency of Two Start-Up Programmes," Discussion Papers of DIW Berlin 671, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp671
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Scott Shane, 2009. "Why encouraging more people to become entrepreneurs is bad public policy," Small Business Economics, Springer, vol. 33(2), pages 141-149, August.
    2. Aysit Tansel & H. Mehmet Taşçı, 2010. "Hazard Analysis of Unemployment Duration by Gender in a Developing Country: The Case of Turkey," LABOUR, CEIS, vol. 24(4), pages 501-530, December.
    3. Jörn Block & Philipp Sandner, 2009. "Necessity and Opportunity Entrepreneurs and Their Duration in Self-employment: Evidence from German Micro Data," Journal of Industry, Competition and Trade, Springer, vol. 9(2), pages 117-137, June.
    4. Wolff, Joachim & Nivorozhkin, Anton, 2008. "Start me up: The effectiveness of a self-employment programme for needy unemployed people in Germany," IAB Discussion Paper 200820, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Rodríguez-Planas, Núria, 2007. "What Works Best for Getting the Unemployed Back to Work: Employment Services or Small-Business Assistance Programmes? Evidence from Romania," IZA Discussion Papers 3051, Institute for the Study of Labor (IZA).
    6. Cueto Iglesias, Begoña, 2008. "Políticas de fomento del autoempleo y creación de empleo. Un estudio de caso," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 26, pages 195-210, Septiembr.
    7. Stephan Gesine, 2008. "The Effects of Active Labor Market Programs in Germany: An Investigation Using Different Definitions of Non-Treatment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 586-611, October.
    8. Glocker, Daniela & Steiner, Viktor, 2007. "Self-Employment: A Way to End Unemployment? Empirical Evidence from German Pseudo-Panel Data," IZA Discussion Papers 2561, Institute for the Study of Labor (IZA).
    9. Magnus Lofstrom, 2013. "Does self-employment increase the economic well-being of low-skilled workers?," Small Business Economics, Springer, vol. 40(4), pages 933-952, May.
    10. Bernhard, Sarah & Hohmeyer, Katrin & Jozwiak, Eva & Koch, Susanne & Kruppe, Thomas & Stephan, Gesine & Wolff, Joachim, 2008. "Aktive Arbeitsmarktpolitik in Deutschland und ihre Wirkungen," IAB-Forschungsbericht 200802, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Haller, Stefanie & Wolff, Joachim & Zabel, Cordula, 2010. "Einstiegsgeld als Gründungsförderung : Teilnehmerstrukturen und Determinanten der Förderleistung (Initial subsidies for start-up entrepreneurs)," IAB-Forschungsbericht 201009, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Schmid, Günther & Modrack, Simone, 2008. "Employment dynamics in Germany: Lessons to be learned from the Hartz reforms," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2008-102, Social Science Research Center Berlin (WZB).

    More about this item

    Keywords

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

    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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