Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

81 Pages Posted: 23 Sep 2013 Last revised: 21 Jul 2019

See all articles by Johan Hombert

Johan Hombert

HEC Paris - Finance Department

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

David Alexandre Sraer

University of California, Berkeley; Princeton University

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

Date Written: June 18, 2019

Abstract

Since 2003, the French unemployment insurance system provides downside insurance to eligible unemployed workers who decide to start a business. We evaluate how this policy change affects entry into self-employment. The reform significantly increases firm creation without worsening the quality of new entrants. Firms started post-reform are initially smaller, but employment growth, productivity, and survival rates are similar to entrants pre-reform. New entrepreneurs are also similar in characteristics and expectations. Finally, jobs created by new entrants crowd-out employment in incumbent firms almost one-for-one, but have higher productivity and value-added than the displaced incumbents. These results highlight the benefits of allowing experimentation by lowering barriers to self-employment.

Keywords: Entrepreneurship; Unemployment Insurance; Crowding Out

Suggested Citation

Hombert, Johan and Schoar, Antoinette and Sraer, David Alexandre and Thesmar, David, Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France (June 18, 2019). HEC Paris Research Paper No. FIN-2013-1020. Available at SSRN: https://ssrn.com/abstract=2329357 or http://dx.doi.org/10.2139/ssrn.2329357

Johan Hombert (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

50 Memorial Drive, E52-447
Cambridge, MA 02142
United States
617-253-3763 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David Alexandre Sraer

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
16172259767 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
389
Abstract Views
3,155
rank
75,222
PlumX Metrics