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Subsidized Start-Ups out of Unemployment: A Comparison to Regular Business Start-Ups

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  • Caliendo, Marco

    (University of Potsdam)

  • Hogenacker, Jens

    (Q_Perior AG)

  • Künn, Steffen

    (Maastricht University)

  • Wießner, Frank

    (Catholic University of Eichstätt-Ingolstadt)

Abstract

Offering unemployed individuals a subsidy to become self-employed is a widespread active labor market policy strategy. Previous studies have illustrated its high effectiveness to help participants escaping unemployment and improving their labor market prospects compared to other unemployed individuals. However, the examination of start-up subsidies from a business perspective has only received little attention to date. Using a new dataset based on a survey allows us to compare subsidized start-ups out of unemployment with regular business founders, with respect to not only personal characteristics but also business outcomes. The results indicate that previously unemployed entrepreneurs face disadvantages in variables correlated with entrepreneurial ability and access to capital. 19 months after start-up, the subsidized businesses experience higher survival, but lag behind regular business founders in terms of income, business growth and innovation. Moreover, we show that expected deadweight losses related to start-up subsidies occur on a (much) lower scale than usually assumed.

Suggested Citation

  • Caliendo, Marco & Hogenacker, Jens & Künn, Steffen & Wießner, Frank, 2015. "Subsidized Start-Ups out of Unemployment: A Comparison to Regular Business Start-Ups," IZA Discussion Papers 8817, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp8817
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    Cited by:

    1. Caliendo, Marco & Tübbicke, Stefan, 2019. "Do Start-Up Subsidies for the Unemployed Affect Participants' Well-Being? A Rigorous Look at (Un-)Intended Consequences of Labor Market Policies," IZA Discussion Papers 12755, Institute of Labor Economics (IZA).
    2. Lutz Bellmann & Marco Caliendo & Stefan Tübbicke, 2018. "The Post‐Reform Effectiveness of the New German Start‐Up Subsidy for the Unemployed," LABOUR, CEIS, vol. 32(3), pages 293-319, September.
    3. Walid A Nakara & Karim Messeghem & Andry Ramaroson, 2019. "L’innovation produit et service dans un contexte de pauvreté : une analyse multiniveau," Post-Print hal-02519418, HAL.
    4. Srhoj Stjepan & Zilic Ivan, 2021. "“Fine...I’ll do it myself”: Lessons from self-employment grants in a long recession period," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-32, May.
    5. João Ricardo Faria & Juan Carlos Cuestas & Luis Gil-Alana & Estefania Mourelle, 2021. "Self-employment by gender in the EU: convergence and clusters," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(3), pages 717-741, August.
    6. Begoña Cueto & Matías Mayor & Patricia Suárez, 2017. "Evaluation of the Spanish flat rate for young self-employed workers," Small Business Economics, Springer, vol. 49(4), pages 937-951, December.
    7. Caliendo, Marco & Künn, Steffen & Weissenberger, Martin, 2020. "Catching up or lagging behind? The long-term business and innovation potential of subsidized start-ups out of unemployment," Research Policy, Elsevier, vol. 49(10).
    8. Marco Caliendo, 2016. "Start-up subsidies for the unemployed: Opportunities and limitations," IZA World of Labor, Institute of Labor Economics (IZA), pages 200-200, March.
    9. Aracely Soto-Simeone & Teemu Kautonen, 2021. "Senior entrepreneurship following unemployment: a social identity theory perspective," Review of Managerial Science, Springer, vol. 15(6), pages 1683-1706, August.
    10. Caliendo, Marco & Kritikos, Alexander S. & Stier, Claudia, 2022. "The Influence of Start-up Motivation on Entrepreneurial Performance," IZA Discussion Papers 15793, Institute of Labor Economics (IZA).
    11. Büttner, Thomas & Schewe, Torben & Stephan, Gesine, 2015. "Wirkung arbeitsmarktpolitischer Instrumente im SGB III: Maßnahmen auf dem Prüfstand (Measures under scrutiny : The effectiveness of active labor market policy instruments in Germany)," IAB-Kurzbericht 201508, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Martin Mabunda Baluku & Julius Fred Kikooma & Edward Bantu & Peter Onderi & Kathleen Otto, 2019. "Impact of personal cultural orientations and cultural intelligence on subjective success in self-employment in multi-ethnic societies," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 9(1), pages 1-22, December.
    13. Tina Haussen & Marcus Schlegel, 2020. "Unemployment reduction through solo self-employment: A gender question?," Empirical Economics, Springer, vol. 59(6), pages 3085-3105, December.
    14. Monika Mühlböck & Julia-Rita Warmuth & Marian Holienka & Bernhard Kittel, 2018. "Desperate entrepreneurs: no opportunities, no skills," International Entrepreneurship and Management Journal, Springer, vol. 14(4), pages 975-997, December.
    15. Nardo Vries & Werner Liebregts & André Stel, 2020. "Explaining entrepreneurial performance of solo self-employed from a motivational perspective," Small Business Economics, Springer, vol. 55(2), pages 447-460, August.
    16. Sandra M. Sánchez‐Cañizares & L. Javier Cabeza‐Ramírez & M. Dolores Guerrero‐Baena, 2020. "Evaluation of self‐employment support policies using survival analysis. The discounted flat rate in Andalusia (Spain)," Papers in Regional Science, Wiley Blackwell, vol. 99(5), pages 1389-1411, October.
    17. 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.
    18. Marco Caliendo & Maximilian Goethner & Martin Weißenberger, 2019. "Entrepreneurial Persistence Beyond Survival: Measurement and Determinants," CEPA Discussion Papers 11, Center for Economic Policy Analysis.
    19. 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".
    20. Walid A. Nakara & Karim Messeghem & Andry Ramaroson, 2021. "Innovation and entrepreneurship in a context of poverty: a multilevel approach," Small Business Economics, Springer, vol. 56(4), pages 1601-1617, April.
    21. 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.
    22. Catherine Laffineur & Saulo Dubard Barbosa & Alain Fayolle & Emeran Nziali, 2017. "Active labor market programs’ effects on entrepreneurship and unemployment," Small Business Economics, Springer, vol. 49(4), pages 889-918, December.
    23. Eriko Naiki & Yuta Ogane, 2022. "Human capital effects on fundraising for necessity- and opportunity-based entrepreneurs," Small Business Economics, Springer, vol. 59(2), pages 721-741, August.
    24. Raquel Justo & Emilio Congregado & Concepción Román, 2021. "Becoming self-employed from inactivity: an in-depth analysis of satisfaction," Small Business Economics, Springer, vol. 56(1), pages 145-187, January.

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    More about this item

    Keywords

    evaluation; start-up subsidies; entrepreneurship; deadweight effects; innovation;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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