Turning Unemployment into Self-Employment: Effectiveness and Efficiency of Two Start-Up Programmes

38 Pages Posted: 29 Mar 2007

See all articles by Hans J. Baumgartner

Hans J. Baumgartner

DIW Berlin, German Institute for Economic Research

Marco Caliendo

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

Date Written: March 2007

Abstract

Turning unemployment into self-employment has become a major focus of German active labour market policy (ALMP) in recent years. If effective, this would not only reduce Germany's persistently high unemployment rate, but also increase its notoriously low self-employment rate. Empirical evidence on the effectiveness of such programmes is scarce. The contribution of the present paper is twofold: first, we evaluate the effectiveness of two start-up programmes for the unemployed. Our outcome variables include the probability of being employed, the probability of being unemployed, and personal income. Second, based on the results of this analysis, we conduct an efficiency analysis, i.e., we estimate whether the Federal Employment Agency has saved money by placing unemployed individuals in these programmes. Our results show that at the end of the observation period, both programmes are effective and one is also efficient. The considerable positive effects present a stark contrast to findings from evaluations of other German ALMP programmes in recent years. Hence, ALMP programmes aimed at moving the unemployed into self-employment may prove to be among the most effective, both in Germany and elsewhere.

Keywords: start-up subsidies, evaluation, effectiveness, efficiency, self-employment

JEL Classification: J68, C14, H43, M13

Suggested Citation

Baumgartner, Hans J. and Caliendo, Marco, Turning Unemployment into Self-Employment: Effectiveness and Efficiency of Two Start-Up Programmes (March 2007). IZA Discussion Paper No. 2660, Available at SSRN: https://ssrn.com/abstract=976874

Hans J. Baumgartner

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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

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