IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Start-up Subsidies for the Unemployed: Long-Term Evidence and Effect Heterogeneity

  • Marco Caliendo
  • Steffen Künn

Turning unemployment into self-employment has become an increasingly important part of active labor market policies (ALMP) in many OECD countries. Germany is a good example where the spending on start-up subsidies for the unemployed accounted for nearly 17% of the total spending on ALMP in 2004. In contrast to other programs-like vocational training, job creation schemes, or wage subsidies-the empirical evidence on the effectiveness of such schemes is still scarce; especially regarding long-term effects and effect heterogeneity. This paper aims to close this gap. We use administrative and survey data from a large sample of participants in two distinct start-up programs and a control group of unemployed individuals. We find that over 80% of participants are integrated in the labor market and have relatively high labor income five years after start-up. Additionally, participants are much more satisfied with their current occupational situation compared to previous jobs. Based on conditional propensity score matching methods we estimate the long-term effects of the programs against non-participation. Our results show that both programs are effective with respect to income and employment outcomes in the long-run. Moreover, we consider effect heterogeneity with respect to several dimensions and show that start-up subsidies for the unemployed tend to be most effective for disadvantaged groups in the labor market.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.353402.de/dp985.pdf
Download Restriction: no

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 985.

as
in new window

Length: 34 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp985
Contact details of provider: Postal: Mohrenstraße 58, D-10117 Berlin
Phone: xx49-30-89789-0
Fax: xx49-30-89789-200
Web page: http://www.diw.de/en
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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 20035, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  2. Guido Imbens & Jeffrey Wooldridge, 2008. "Recent developments in the econometrics of program evaluation," CeMMAP working papers CWP24/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Caliendo, Marco, 2009. "Income support systems, labor market policies and labor supply: the German experience," Working Paper Series 2009:26, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  4. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2009. "Risk attitudes of nascent entrepreneurs–new evidence from an experimentally validated survey," Small Business Economics, Springer, vol. 32(2), pages 153-167, February.
  5. Lechner, Michael & Wunsch, Conny, 2007. "What Did All the Money Do? On the General Ineffectiveness of Recent West German Labour Market Programmes," CEPR Discussion Papers 6306, C.E.P.R. Discussion Papers.
  6. Almeida, Rita K. & Galasso, Emanuela, 2007. "Jump-Starting Self-Employment? Evidence among Welfare Participants in Argentina," IZA Discussion Papers 2902, Institute for the Study of Labor (IZA).
  7. Caliendo, Marco & Kopeinig, Sabine, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," IZA Discussion Papers 1588, Institute for the Study of Labor (IZA).
  8. Caliendo, Marco & Hujer, Reinhard, 2005. "The Microeconometric Estimation of Treatment Effects - An Overview," IZA Discussion Papers 1653, Institute for the Study of Labor (IZA).
  9. 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, vol. 121(1-2), pages 99-124.
  10. Guido W. Imbens, 2003. "Nonparametric Estimation of Average Treatment Effects under Exogeneity: A Review," NBER Technical Working Papers 0294, National Bureau of Economic Research, Inc.
  11. Clark, Kenneth & Drinkwater, Stephen, 2000. "Pushed out or pulled in? Self-employment among ethnic minorities in England and Wales," Labour Economics, Elsevier, vol. 7(5), pages 603-628, September.
  12. Michael Fritsch, 2008. "How does new business formation affect regional development? Introduction to the special issue," Small Business Economics, Springer, vol. 30(1), pages 1-14, January.
  13. David Card & Jochen Kluve & Andrea Weber, 2010. "Active Labour Market Policy Evaluations: A Meta-Analysis," Economic Journal, Royal Economic Society, vol. 120(548), pages F452-F477, November.
  14. Richard K. Crump & V. Joseph Hotz & Guido W. Imbens & Oscar A. Mitnik, 2004. "Dealing with Limited Overlap in Estimation of Average Treatment Effects," Working Papers 0716, University of Miami, Department of Economics, revised 12 Jun 2007.
  15. Völter, Robert & Osikominu, Aderonke & Fitzenberger, Bernd, 2007. "Get Training or Wait? Long-Run Employment Effects of Training Programs for the Unemployed in West Germany," ZEW Discussion Papers 06-39 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  16. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  17. Ichino, Andrea & Mealli, Fabrizia & Nannicini, Tommaso, 2006. "From Temporary Help Jobs to Permanent Employment: What Can We Learn from Matching Estimators and their Sensitivity?," IZA Discussion Papers 2149, Institute for the Study of Labor (IZA).
  18. Michael Lechner & Ruth Miquel & Conny Wunsch, 2004. "Long-run Effects of Public Sector Sponsored Training in West Germany," University of St. Gallen Department of Economics working paper series 2004 2004-19, Department of Economics, University of St. Gallen.
  19. Sascha O. Becker & Marco Caliendo, 2007. "Sensitivity analysis for average treatment effects," Stata Journal, StataCorp LP, vol. 7(1), pages 71-83, February.
  20. 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, vol. 186(1), pages 59-72, October.
  21. Betcherman, Gordon & Olivas, Karina & Dar, Amit, 2004. "Impacts of active labor market programs : new evidence from evaluations with particular attention to developing and transition countries," Social Protection Discussion Papers 29142, The World Bank.
  22. Baumgartner, Hans J. & Caliendo, Marco, 2007. "Turning Unemployment into Self-Employment: Effectiveness and Efficiency of Two Start-Up Programmes," IZA Discussion Papers 2660, Institute for the Study of Labor (IZA).
  23. repec:iab:iabzaf:v:37:i:2:p:146-175 is not listed on IDEAS
  24. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  25. Tommaso Nannicini, 2007. "Simulation-based sensitivity analysis for matching estimators," Stata Journal, StataCorp LP, vol. 7(3), pages 334-350, September.
  26. Barbara Sianesi, 2002. "An evaluation of the Swedish system of active labour market programmes in the 1990s," IFS Working Papers W02/01, Institute for Fiscal Studies.
  27. Pfeiffer, Friedhelm & Reize, Frank, 2000. "Business start-ups by the unemployed -- an econometric analysis based on firm data," Labour Economics, Elsevier, vol. 7(5), pages 629-663, September.
  28. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2004. "Evaluating the impact of education on earnings in the UK: models, methods and results from the NCDS," LSE Research Online Documents on Economics 19451, London School of Economics and Political Science, LSE Library.
  29. Gesine Stephan, 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), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(5+6), pages 586-611, December.
  30. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  31. Carling, Kenneth & Gustafson, Lena, 1999. "Self-employment grants vs. subsidized employment: Is there a difference in the re-unemployment risk?," Working Paper Series 1999:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  32. Begona Cueto & Javier Mato, 2006. "An analysis of self-employment subsidies with duration models," Applied Economics, Taylor & Francis Journals, vol. 38(1), pages 23-32.
  33. Stephan, Gesine & Pahnke, André, 2008. "A pairwise comparison of the effectiveness of selected active labour market programmes in Germany," IAB Discussion Paper 200829, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  34. Jochen Kluve & Christoph M. Schmidt, 2002. "Can training and employment subsidies combat European unemployment?," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 409-448, October.
  35. Cressy, Robert, 1996. "Are Business Startups Debt-Rationed?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1253-70, September.
  36. Thomas Dunn & Douglas Holtz-Eakin, 1996. "Financial Capital, Human Capital, and the Transition to Self-Employment:Evidence from Intergenerational Links," NBER Working Papers 5622, National Bureau of Economic Research, Inc.
  37. Christopher J. O'Leary, 1999. "Promoting Self Employment Among the Unemployed in Hungary and Poland," Upjohn Working Papers and Journal Articles 99-55, W.E. Upjohn Institute for Employment Research.
  38. Dar, Amit & Tzannatos, Zafiris, 1999. "Active labor market programs: a review of the evidence from evaluations," Social Protection Discussion Papers 20116, The World Bank.
  39. 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).
  40. Peter Whiteford & Willem Adema, 2007. "What Works Best in Reducing Child Poverty: A Benefit or Work Strategy?," OECD Social, Employment and Migration Working Papers 51, OECD Publishing.
  41. Amartya Sen, 1997. "Inequality, Unemployment and Contemporary Europe," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 07, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  42. Dunn, Thomas & Holtz-Eakin, Douglas, 2000. "Financial Capital, Human Capital, and the Transition to Self-Employment: Evidence from Intergenerational Links," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 282-305, April.
  43. N�ria Rodríguez-Planas, 2010. "Channels through which Public Employment Services and Small Business Assistance Programmes Work," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(4), pages 458-485, 08.
  44. David Card & Jochen Kluve & Andrea Weber, 2009. "Active Labor Market Policy Evaluations – A Meta-analysis," Ruhr Economic Papers 0086, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  45. Dar, Amit & Gill, Indermit S, 1998. "Evaluating Retraining Programs in OECD Countries: Lessons Learned," World Bank Research Observer, World Bank Group, vol. 13(1), pages 79-101, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp985. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.