Regional Effect Heterogeneity of Start-Up Subsidies for the Unemployed

43 Pages Posted: 29 Jun 2013

See all articles by Marco Caliendo

Marco Caliendo

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

Steffen Künn

University of Potsdam

Abstract

Recent microeconometric evaluation studies have shown that start-up subsidies for unemployed individuals are an effective policy tool to improve long-term employment and income prospects of participants, in particular compared to other active labor market programs (e.g. training, job search assistance or job creation schemes). What has not been examined yet are the potentially heterogeneous effects of start-up programs across regional labor markets. Labor demand side restrictions in areas with relatively bad labor market conditions generally increase entries into start-up programs as job offers are limited and starting an own business is an opportunity to leave unemployment. However, the survival of firms in deprived areas is also lower, such that the overall effect remains an empirical question.We use a combination of administrative and survey data and observe participants in two distinct start-up programs in Germany for five years after start-up as well as a control group of unemployed who did not enter these programs. We add information on unemployment rates and GDP per capita at the labor agency district level to distinguish regional labor markets. Using propensity score matching methods we find supportive evidence that the founding process and development of businesses as well as program effectiveness is influenced by prevailing economic conditions at start-up.

Keywords: start-up subsidies, evaluation, effect heterogeneity, regional effects, self-employment

JEL Classification: J68, R11, C14, H43, L26

Suggested Citation

Caliendo, Marco and Künn, Steffen, Regional Effect Heterogeneity of Start-Up Subsidies for the Unemployed. IZA Discussion Paper No. 7460. Available at SSRN: https://ssrn.com/abstract=2287070

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany
+49(0)331/9773225 (Phone)
+49(0)331/9773210 (Fax)

HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

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

P.O. Box 7240
Bonn, D-53072
Germany

Steffen Künn

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany

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