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

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Listed:
  • 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 for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp8817
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    References listed on IDEAS

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    1. repec:bla:labour:v:32:y:2018:i:3:p:293-319 is not listed on IDEAS
    2. repec:kap:sbusec:v:49:y:2017:i:4:d:10.1007_s11187-017-9857-7 is not listed on IDEAS
    3. 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.
    4. repec:kap:sbusec:v:49:y:2017:i:4:d:10.1007_s11187-017-9853-y is not listed on IDEAS
    5. Marco Caliendo, 2016. "Start-up subsidies for the unemployed: Opportunities and limitations," IZA World of Labor, Institute for the Study of Labor (IZA), pages 200-200, March.
    6. Moral-Arce, Ignacio & Martín-Román, Javier & Martín-Román, Ángel L., 2018. "Cessation of activity benefit of Spanish self-employed workers: a heterogeneous impact evaluation," MPRA Paper 85111, University Library of Munich, Germany.
    7. 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.

    More about this item

    Keywords

    evaluation; start-up subsidies; entrepreneurship; deadweight effects; innovation;

    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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