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Design and Effectiveness of Start-Up Subsidies

  • While a growing body of literature finds positive impacts of Start-Up Subsidies (SUS) on labor market outcomes of participants, little is known about how the design of these programs shapes their effectiveness and hence how to improve policy. As experimental variation in program design is unavailable, we exploit the 2011 reform of the current German SUS program for the unemployed which strengthened case-workers’ discretionary power, increased entry requirements and reduced monetary support. We estimate the impact of the reform on the program’s effectiveness using samples of participants and non-participants from before and after the reform. To control for time-constant unobserved heterogeneity as well as differential selection patterns based on observable characteristics over time, we combine Difference-in-Differences with inverse probability weighting using covariate balancing propensity scores. Holding participants’ observed characteristics as well as macroeconomic conditions constant, the results suggest that the reform wasWhile a growing body of literature finds positive impacts of Start-Up Subsidies (SUS) on labor market outcomes of participants, little is known about how the design of these programs shapes their effectiveness and hence how to improve policy. As experimental variation in program design is unavailable, we exploit the 2011 reform of the current German SUS program for the unemployed which strengthened case-workers’ discretionary power, increased entry requirements and reduced monetary support. We estimate the impact of the reform on the program’s effectiveness using samples of participants and non-participants from before and after the reform. To control for time-constant unobserved heterogeneity as well as differential selection patterns based on observable characteristics over time, we combine Difference-in-Differences with inverse probability weighting using covariate balancing propensity scores. Holding participants’ observed characteristics as well as macroeconomic conditions constant, the results suggest that the reform was successful in raising employment effects on average. As these findings may be contaminated by changes in selection patterns based on unobserved characteristics, we assess our results using simulation-based sensitivity analyses and find that our estimates are highly robust to changes in unobserved characteristics. Hence, the reform most likely had a positive impact on the effectiveness of the program, suggesting that increasing entry requirements and reducing support in-creased the program’s impacts while reducing the cost per participant.show moreshow less

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Metadaten
Author details:Marco CaliendoORCiDGND, Stefan TübbickeGND
URN:urn:nbn:de:kobv:517-opus4-500056
DOI:https://doi.org/10.25932/publishup-50005
ISSN:2628-653X
Title of parent work (English):CEPA Discussion Papers
Subtitle (English):Evidence from a Policy Reform in Germany
Publication series (Volume number):CEPA Discussion Papers (30)
Publication type:Working Paper
Language:English
Date of first publication:2021/03/19
Publication year:2021
Publishing institution:Universität Potsdam
Release date:2021/03/19
Tag:Difference-in-Differences; Institutions; Policy Reform; Start-Up Subsidies
Issue:30
Number of pages:20
RVK - Regensburg classification:QP 230, QP 380, QP 710
Organizational units:Extern / Extern
Zentrale und wissenschaftliche Einrichtungen / Center for Economic Policy Analysis (CEPA)
Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften / Fachgruppe Volkswirtschaftslehre
DDC classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL classification:H Public Economics / H4 Publicly Provided Goods / H43 Project Evaluation; Social Discount Rate
J Labor and Demographic Economics / J6 Mobility, Unemployment, and Vacancies / J68 Public Policy
L Industrial Organization / L2 Firm Objectives, Organization, and Behavior / L26 Entrepreneurship
Peer review:Nicht referiert
Publishing method:Open Access / Bronze Open-Access
License (German):License LogoKeine öffentliche Lizenz: Unter Urheberrechtsschutz
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