Subsidized Start-Ups Out of Unemployment: A Comparison to Regular Business Start-Ups

42 Pages Posted: 14 Feb 2015

See all articles by Marco Caliendo

Marco Caliendo

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

Jens Hogenacker

University of Potsdam - Economics and Social Sciences

Steffen Künn

University of Potsdam

Frank Wießner

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Abstract

Offering unemployed individuals a subsidy to become self-employed is a widespread active labor market policy strategy. Previous studies have illustrated its high effectiveness to help participants escaping unemployment and improving their labor market prospects compared to other unemployed individuals. However, the examination of start-up subsidies from a business perspective has only received little attention to date. Using a new dataset based on a survey allows us to compare subsidized start-ups out of unemployment with regular business founders, with respect to not only personal characteristics but also business outcomes. The results indicate that previously unemployed entrepreneurs face disadvantages in variables correlated with entrepreneurial ability and access to capital. 19 months after start-up, the subsidized businesses experience higher survival, but lag behind regular business founders in terms of income, business growth and innovation. Moreover, we show that expected deadweight losses related to start-up subsidies occur on a (much) lower scale than usually assumed.

Keywords: innovation, deadweight effects, entrepreneurship, start-up subsidies, evaluation

JEL Classification: C14, L26, J68

Suggested Citation

Caliendo, Marco and Hogenacker, Jens and Künn, Steffen and Wießner, Frank, Subsidized Start-Ups Out of Unemployment: A Comparison to Regular Business Start-Ups. IZA Discussion Paper No. 8817, Available at SSRN: https://ssrn.com/abstract=2564950

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

Jens Hogenacker

University of Potsdam - Economics and Social Sciences ( email )

Potsdam
Germany

Steffen Künn

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany

Frank Wießner

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

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