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Start-Up Subsidies in East Germany: Finally, a Policy that Works?

  • Caliendo, Marco

    ()

    (University of Potsdam)

The German government has spent between 7bn and 11bn Euro per year on active labor market policies (ALMP) in East Germany in the last decade. The effectiveness of the most important programs (in terms of participants and spending) such as job-creation schemes and vocational training has been evaluated quite thoroughly in recent years. The results are disappointing, indicating that nearly all of these ‘traditional’ programs have to be rated as a failure. In light of these findings, policies to encourage unemployed people to become self-employed gained increasing importance. We present first evidence on the effectiveness of two start-up programs in East Germany. Our findings – even though partly preliminary – are rather promising, showing that these programs increase employment chances and earnings of participants. Hence, start-up subsidies might work even in a labor market with structural problems such as the one in East Germany.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3360.

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Length: 32 pages
Date of creation: Feb 2008
Date of revision:
Publication status: published in: International Journal of Manpower, 2009, 30(7), 625-647
Handle: RePEc:iza:izadps:dp3360
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  1. Marco Caliendo & Alexander S. Kritikos, 2008. "Start-Ups by the Unemployed: Characteristics, Survival and Direct Employment Effects," Working Papers 008, Hanseatic University, Germany, Department of Economics.
  2. Hans J. Baumgartner & Marco Caliendo, 2008. "Turning Unemployment into Self-Employment: Effectiveness of Two Start-Up Programmes," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(3), pages 347-373, 06.
  3. DiNardo, John & Tobias, Justin, 2001. "Nonparametric Density and Regression Estimation," Staff General Research Papers 12020, Iowa State University, Department of Economics.
  4. Alberto Abadie & Guido W. Imbens, 2008. "On the Failure of the Bootstrap for Matching Estimators," Econometrica, Econometric Society, vol. 76(6), pages 1537-1557, November.
  5. 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.
  6. 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).
  7. Biewen, Martin & Fitzenberger, Bernd & Osikominu, Aderonke & Waller, Marie, 2007. "Which Program for Whom? Evidence on the Comparative Effectiveness of Public Sponsored Training Programs in Germany," IZA Discussion Papers 2885, Institute for the Study of Labor (IZA).
  8. 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.
  9. Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," Discussion Papers of DIW Berlin 485, DIW Berlin, German Institute for Economic Research.
  10. Marco Caliendo & Alexander S. Kritikos, 2009. "Die reformierte Gründungsförderung für Arbeitslose: Chancen und Risiken," Discussion Papers of DIW Berlin 856, DIW Berlin, German Institute for Economic Research.
  11. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
  12. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
  13. Fredriksson, Peter & Johansson, Per, 2004. "Dynamic Treatment Assignment – The Consequences for Evaluations Using Observational Data," IZA Discussion Papers 1062, Institute for the Study of Labor (IZA).
  14. Marco Caliendo & Reinhard Hujer, 2006. "The microeconometric estimation of treatment effects—An overview," AStA Advances in Statistical Analysis, Springer, vol. 90(1), pages 199-215, March.
  15. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  16. Marco Caliendo & Viktor Steiner, 2005. "Aktive Arbeitsmarktpolitik in Deutschland: Bestandsaufnahme und Bewertung der mikroökonomischen Evaluationsergebnisse," Discussion Papers of DIW Berlin 515, DIW Berlin, German Institute for Economic Research.
  17. Y Georgellis & J G Sessions & N Tsitsianis, 2005. "Self-Employment Longitudinal Dynamics: A Review of the Literature," Economic Issues Journal Articles, Economic Issues, vol. 10(2), pages 51-84, September.
  18. Galdo, Jose C. & Smith, Jeffrey A. & Black, Dan A., 2007. "Bandwidth Selection and the Estimation of Treatment Effects with Unbalanced Data," IZA Discussion Papers 3095, Institute for the Study of Labor (IZA).
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