The Post-Reform Effectiveness of the New German Start-Up Subsidy for the Unemployed

37 Pages Posted: 2 Oct 2017

See all articles by Lutz Bellmann

Lutz Bellmann

Institute for Employment Research (IAB); Institute for the Study of Labor (IZA)

Marco Caliendo

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

Stefan Tübbicke

University of Potsdam

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Abstract

Start-up subsidies for the unemployed have long been an important active labor market policy strategy in Germany. The current subsidy program underwent a major reform in 2011 that changed its key parameters: support was lowered, eligibility criteria were tightened and entitlement was abandoned by granting caseworkers the right to reject applications. Ex-ante predictions on the post-reform effectiveness of the program are ambiguous, and knowledge about the importance of institutional details of such a program is very limited, making a new evaluation necessary. In our descriptive analysis, we compare personal and business characteristics of participants before and after the reform and we find significant differences in terms of gender composition, educational attainment and industry-specific experience. Post-reform participants also perform better in terms of subsequent labor market integration and show signs of higher commitment. These findings give us some indication for interpreting our estimates of causal effects of the post-reform program. We find that for both men and women, employment and income effects of the post-reform program are positive, sizable, and larger than what was estimated for the pre-reform program. All in all, the programs effectiveness seems to have improved through the reform. Potential reasons for this are discussed and include better screening of participants by caseworkers, higher rates of commitment and changes in macroeconomic conditions.

Keywords: start-up subsidies, policy reform, matching, effect heterogeneity

JEL Classification: J68, H43, C14, L26

Suggested Citation

Bellmann, Lutz and Caliendo, Marco and Tübbicke, Stefan, The Post-Reform Effectiveness of the New German Start-Up Subsidy for the Unemployed. IZA Discussion Paper No. 11055, Available at SSRN: https://ssrn.com/abstract=3045752

Lutz Bellmann (Contact Author)

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany
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+49 911 179 3297 (Fax)

Institute for the Study of Labor (IZA)

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

Marco Caliendo

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

Stefan Tübbicke

University of Potsdam

August-Bebel Strasse 89
Potsdam, 14482
Germany

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