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Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

Author

Listed:
  • Johan Hombert

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Antoinette Schoar
  • David Alexandre Sraer
  • David Thesmar

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

We study a large-scale French reform that provided generous downside insurance for unemployed individuals starting a business. We study whether this reform 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. In aggregate, the effect of the reform on employment is largely offset by large crowd-out effects. However, because new firms are more productive, the reform has the impact of raising aggregate productivity. These results suggest that the dispersion of entrepreneurial abilities is small in the data, so that the facilitation of entry leads to sizable Schumpeterian dynamics at the firm-level.

Suggested Citation

  • Johan Hombert & Antoinette Schoar & David Alexandre Sraer & David Thesmar, 2013. "Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France," Working Papers hal-02058245, HAL.
    • Handle: RePEc:hal:wpaper:hal-02058245
    DOI: 10.2139/ssrn.2329357
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    JEL classification:

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

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