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Regional Effect Heterogeneity of Start-Up Subsidies for the Unemployed

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  • Caliendo, Marco

    (University of Potsdam)

  • Künn, Steffen

    (Maastricht University)

Abstract

Recent microeconometric evaluation studies have shown that start-up subsidies for unemployed individuals are an effective policy tool to improve long-term employment and income prospects of participants, in particular compared to other active labor market programs (e.g. training, job search assistance or job creation schemes). What has not been examined yet are the potentially heterogeneous effects of start-up programs across regional labor markets. Labor demand side restrictions in areas with relatively bad labor market conditions generally increase entries into start-up programs as job offers are limited and starting an own business is an opportunity to leave unemployment. However, the survival of firms in deprived areas is also lower, such that the overall effect remains an empirical question. We use a combination of administrative and survey data and observe participants in two distinct start-up programs in Germany for five years after start-up as well as a control group of unemployed who did not enter these programs. We add information on unemployment rates and GDP per capita at the labor agency district level to distinguish regional labor markets. Using propensity score matching methods we find supportive evidence that the founding process and development of businesses as well as program effectiveness is influenced by prevailing economic conditions at start-up.

Suggested Citation

  • Caliendo, Marco & Künn, Steffen, 2013. "Regional Effect Heterogeneity of Start-Up Subsidies for the Unemployed," IZA Discussion Papers 7460, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7460
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    References listed on IDEAS

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    Cited by:

    1. Alfredo Monte & Luca Pennacchio, 2020. "Historical roots of regional entrepreneurship: the role of knowledge and creativity," Small Business Economics, Springer, vol. 55(1), pages 1-22, June.
    2. Caliendo, Marco & Künn, Steffen & Weißenberger, Martin, 2016. "Personality traits and the evaluation of start-up subsidies," European Economic Review, Elsevier, vol. 86(C), pages 87-108.
    3. Henley, Andrew, 2019. "Transitioning from Solo Self-Employed to Microbusiness Employer: Local Economic Environment or Owner Characteristics?," IZA Discussion Papers 12189, Institute of Labor Economics (IZA).
    4. Marco Caliendo & Stefan Tübbicke, 2020. "New evidence on long-term effects of start-up subsidies: matching estimates and their robustness," Empirical Economics, Springer, vol. 59(4), pages 1605-1631, October.
    5. Lo, Kuang-Ta & Pan, Jiun-Nan & Peng, Shi-Shu, 2020. "The role of gender and its potential channels to affect self-employment in Taiwan," Economic Modelling, Elsevier, vol. 89(C), pages 601-610.
    6. Verónica Escudero, 2018. "Are active labour market policies effective in activating and integrating low-skilled individuals? An international comparison," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-26, December.
    7. Dvouletý Ondřej, 2017. "Does the Self-employment Policy Reduce Unemployment and Increase Employment? Empirical Evidence from the Czech Regions," Central European Journal of Public Policy, Sciendo, vol. 11(2), pages 11-22, December.
    8. Evers, Katalin & Schleinkofer, Michael, 2015. "Der Gründungszuschuss vor und nach der Reform : same, but different: Ein Vergleich der Teilnehmerstrukturen," IAB-Forschungsbericht 201505, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. Andrew Henley, 2017. "The post-crisis growth in the self-employed: volunteers or reluctant recruits?," Regional Studies, Taylor & Francis Journals, vol. 51(9), pages 1312-1323, September.
    10. Ignacio Moral-Arce & Javier Martín-Román & Ángel L. Martín-Román, 2019. "Cessation of Activity Benefit for Spanish Self-employed Workers: A Heterogeneous Impact Evaluation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 231(4), pages 41-79, December.
    11. Elisa Operti, 2018. "Tough on criminal wealth? Exploring the link between organized crime’s asset confiscation and regional entrepreneurship," Small Business Economics, Springer, vol. 51(2), pages 321-335, August.
    12. Verónica Escudero & Elva López Mourelo, 2018. "‪La Garantie européenne pour la jeunesse‪. Bilan systématique des mises en œuvre dans les pays membres," Travail et Emploi, La DARES, vol. 0(1), pages 89-122.
    13. Niclas Lavesson, 2018. "How does distance to urban centres influence necessity and opportunity‐based firm start‐ups?," Papers in Regional Science, Wiley Blackwell, vol. 97(4), pages 1279-1303, November.
    14. repec:ilo:ilowps:487304 is not listed on IDEAS
    15. Marco Mariani & Alessandra Mattei & Lorenzo Storchi & Daniele Vignoli, 2017. "The ambiguous effects of public assistance to youth and female start-ups between job creation and entrepreneurship enhancement," Econometrics Working Papers Archive 2017_04, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
    16. L. Behrenz & L. Delander & J. Månsson, 2016. "Is Starting a Business a Sustainable way out of Unemployment? Treatment Effects of the Swedish Start-up Subsidy," Journal of Labor Research, Springer, vol. 37(4), pages 389-411, December.
    17. repec:ilo:ilowps:488891 is not listed on IDEAS

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    More about this item

    Keywords

    start-up subsidies; evaluation; effect heterogeneity; regional effects; self-employment;
    All these keywords.

    JEL classification:

    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • 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
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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