Start-Up Incentives: Entrepreneurship Policy or Active Labour Market Programme?

Abstract

This paper investigates the determinants of the transitions from unemployment to paid employment, own-account work, and employership in Europe, with special focus on the role of some macroeconomic variables. Our results suggest that the coexistence of recession periods, start-up incentives, and strict employment protection may be distorting the occupational choice against true entrepreneurs and favour certain forms of self-employment - such as last resort or dependent. Therefore, public expenditure designed to move the unemployed back to employment might be detrimental to employment rights and the social protection of workers by favouring atypical forms of employment outside the scope of labour laws.

Keywords: true entrepreneurs, last resort self-employment, unemployment, start-up incentives, business cycle, employment protection, Europe

JEL Classification: J24, J64, J68, K31, L26, M13