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

32 Pages Posted: 23 May 2008

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Abstract

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.

Keywords: East Germany, effectiveness, evaluation, start-up subsidies, self-employment

JEL Classification: J68, C14, H43, M13

Suggested Citation

Caliendo, Marco, Start-Up Subsidies in East Germany: Finally, a Policy that Works?. IZA Working Paper No. 3360, Available at SSRN: https://ssrn.com/abstract=1135936 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Marco Caliendo (Contact Author)

University of Potsdam ( email )

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Institute for the Study of Labor (IZA) ( email )

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