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Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

Author

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  • Hombert, Johan

  • Schoar, Antoinette

  • Sraer, David Alexandre

  • Thesmar, David

Abstract

We investigate how a large-scale French reform to reduce the risk from small business creation for unemployed workers, affects the composition of people who are drawn into entrepreneurship. New firms started in response to the reform are, on average, smaller, but have similar growth expectations and education levels compared to start-ups before the reform. They are also as likely to survive or to hire. However, there are large crowd-out effects: Employment in incumbent firms decreases by a similar magnitude as the number of new jobs created in start-ups. These results point to the importance of Schumpeterian dynamics when facilitating entry.

Suggested Citation

  • Hombert, Johan & Schoar, Antoinette & Sraer, David Alexandre & Thesmar, David, 2013. "Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France," HEC Research Papers Series 1020, HEC Paris.
    • Handle: RePEc:ebg:heccah:1020
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    JEL classification:

    • G00 - Financial Economics - - General - - - General

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