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Catching up or Lagging Behind?

  • From an active labor market policy perspective, start-up subsidies for unemployed individuals are very effective in improving long-term labor market outcomes for participants. From a business perspective, however, the assessment of these public programs is less clear since they might attract individuals with low entrepreneurial abilities and produce businesses with low survival rates and little contribution to job creation, economic growth, and innovation. In this paper, we use a rich data set to compare participants of a German start-up subsidy program for unemployed individuals to a group of regular founders who started from nonunemployment and did not receive the subsidy. The data allows us to analyze their business performance up until 40 months after business formation. We find that formerly subsidized founders lag behind not only in survival and job creation, but especially also in innovation activities. The gaps in these business outcomes are relatively constant or even widening over time. Hence, we do not see any indication ofFrom an active labor market policy perspective, start-up subsidies for unemployed individuals are very effective in improving long-term labor market outcomes for participants. From a business perspective, however, the assessment of these public programs is less clear since they might attract individuals with low entrepreneurial abilities and produce businesses with low survival rates and little contribution to job creation, economic growth, and innovation. In this paper, we use a rich data set to compare participants of a German start-up subsidy program for unemployed individuals to a group of regular founders who started from nonunemployment and did not receive the subsidy. The data allows us to analyze their business performance up until 40 months after business formation. We find that formerly subsidized founders lag behind not only in survival and job creation, but especially also in innovation activities. The gaps in these business outcomes are relatively constant or even widening over time. Hence, we do not see any indication of catching up in the longer run. While the gap in survival can be entirely explained by initial differences in observable start-up characteristics, the gap in business development remains and seems to be the result of restricted access to capital as well as differential business strategies and dynamics. Considering these conflicting results for the assessment of the subsidy program from an ALMP and business perspective, policy makers need to carefully weigh the costs and benefits of such a strategy to find the right policy mix.show moreshow less

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Metadaten
Author:Marco CaliendoGND, Steffen Künn, Martin WeißenbergerGND
URN:urn:nbn:de:kobv:517-opus4-437012
DOI:https://doi.org/10.25932/publishup-43701
ISSN:2628-653X
Parent Title (English):CEPA Discussion Papers
Subtitle (English):The Long-Term Business and Innovation Potential of Subsidized Start-Ups out of Unemployment
Series (Serial Number):CEPA Discussion Papers (12)
Document Type:Working Paper
Language:English
Date of first Publication:2019/10/28
Year of Completion:2019
Publishing Institution:Universität Potsdam
Release Date:2019/10/28
Tag:Business Grow; Entrepreneurship; Innovation; Job Creation; Start-up Subsidies
Issue:12
RVK - Regensburg Classification:QP 380, QP 710, QV 200
Organizational units:Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften
Zentrale und wissenschaftliche Einrichtungen / Center for Economic Policy Analysis (CEPA)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL Classification:J Labor and Demographic Economics / J6 Mobility, Unemployment, and Vacancies / J68 Public Policy
L Industrial Organization / L2 Firm Objectives, Organization, and Behavior / L26 Entrepreneurship
M Business Administration and Business Economics; Marketing; Accounting / M1 Business Administration / M13 New Firms; Startups
Peer Review:Nicht referiert
Licence (German):License LogoKeine Nutzungslizenz vergeben - es gilt das deutsche Urheberrecht