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Business Start-ups by the Unemployed - an Econometric Analysis Based on Firm Data

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Listed author(s):
  • Pfeiffer, Friedhelm
  • Reize, Frank

Abstract

This study investigates firm survival and employment growth of start-ups by unemployed people in East and West Germany as promoted by the Work Support Act (so called bridging allowances). In 1994, the services provided were improved considerably, which led to a sharp increase in the number of start-ups by the unemployed. The empirical analysis is based on a sample of newly founded firms from the ZEW Firm Start-up Panel. The sample contains firms which were founded between 1993 and 1995 and could be observed at least one year after their foundation in 4 regions of East and 11 regions of West Germany. In the econometric analysis, self-selection effects are taken into account by using simultaneous models of start-up promotion and firm development. While firm survival seems to be negatively affected by foundation from unemployment, especially in the East German regions, an influence on employment growth is not evident.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 98-38.

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Date of creation: 1998
Handle: RePEc:zbw:zewdip:9838
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Find related papers by JEL classification:
  • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
  • D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
  • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
  • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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  1. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-581, June.
  2. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
  3. Lechner, Michael & Pfeiffer, Friedhelm, 1993. "Planning for Self-Employment at the Beginning of a Market Economy: Evidence from Individual Data of East German Workers," Small Business Economics, Springer, vol. 5(2), pages 111-128, June.
  4. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
  5. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  6. Friedhelm PFEIFFER & Winfried POHLMEIER, 1992. "Income, Uncertainty and the Probability of Self-Employment," Discussion Papers (REL - Recherches Economiques de Louvain) 1992032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Harhoff, Dietmar & Stahl, Konrad & Woywode, Michael, 1998. "Legal Form, Growth and Exit of West German Firms--Empirical Results for Manufacturing, Construction, Trade and Service Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 453-488, December.
  8. Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
  9. William H. Greene, 1998. "Gender Economics Courses in Liberal Arts Colleges: Further Results," The Journal of Economic Education, Taylor & Francis Journals, vol. 29(4), pages 291-300, January.
  10. Pfeiffer, Friedhelm & Reize, Frank, 2000. "Business start-ups by the unemployed -- an econometric analysis based on firm data," Labour Economics, Elsevier, vol. 7(5), pages 629-663, September.
  11. Christopher J. O'Leary, 1999. "Promoting Self Employment Among the Unemployed in Hungary and Poland," Upjohn Working Papers and Journal Articles 99-55, W.E. Upjohn Institute for Employment Research.
  12. Greene, W.H., 1996. "Marginal Effects in the Bivariate Probit Model," Working Papers 96-11, New York University, Leonard N. Stern School of Business, Department of Economics.
  13. Schultz, Theodore W, 1980. " Investment in Entrepreneurial Ability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 82(4), pages 437-448.
  14. Lechner, Michael, 1999. "Earnings and Employment Effects of Continuous Off-the-Job Training in East Germany after Unification," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 74-90, January.
  15. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  16. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  17. Daniel Friedlander & David H. Greenberg & Philip K. Robins, 1997. "Evaluating Government Training Programs for the Economically Disadvantaged," Journal of Economic Literature, American Economic Association, vol. 35(4), pages 1809-1855, December.
  18. William Greene, 1998. "Gender Economics Courses in Liberal Arts Colleges: Comment," Working Papers 98-06, New York University, Leonard N. Stern School of Business, Department of Economics.
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