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Do internships pay off?
(2022)
We study the causal effect of student internship experience in firms on earnings later in life. We use mandatory firm internships at German universities as an instrument for doing a firm internship while attending university. Employing longitudinal data from graduate surveys, we find positive and significant earnings returns of about 6 percent in both ordinary least squares (OLS) and instrumental variables (IV) regressions. The positive returns are particularly pronounced for individuals and areas of study that are characterized by a weak labor market orientation. The empirical findings show that graduates who completed a firm internship face a lower risk of unemployment during the first year of their careers, suggesting a smoother transition to the labor market.
Envy is an unpleasant emotion. If individuals anticipate that comparing their payoff with the (potentially higher) payoff of others will make them envious, they may want to actively avoid information about other people’s payoffs. Given the opportunity to reduce another person’s payoff, an individual’s envy may trigger behavior that is detrimental to welfare. In this case, if individuals anticipate that they will react in a welfare-reducing way, they may also avoid information about other people’s payoffs from the outset. We investigated these two hypotheses using three experiments. We found that 13% of our potentially envious subjects avoided information when they did not have the opportunity to reduce another participant’s payoff. Psychological scales do not explain this behavior. We also found that voluntarily uninformed subjects did neither deduct less of the payoff nor less frequently than subjects who could not avoid the information.
Entrepreneurial persistence is demonstrated by an entrepreneur’s continued positive maintenance of entrepreneurial motivation and constantly-renewed active engagement in a new business venture despite counter forces or enticing alternatives. It is thus a crucial factor for entrepreneurs when pursuing and exploiting their business opportunities and to realize potential economic gains and benefits. Using rich data on a representative sample of German business founders, we investigate the determinants of entrepreneurial persistence. Next to observed survival we also construct a hybrid persistence measure capturing also the motivational dimension of persistence. We analyze the influence of individual-level (human capital and personality) and business-related characteristics on both measures as well as their relative importance. We find that the two indicators emphasize different aspects of persistence. For the survival indicator, the predictive power is concentrated in business characteristics and human capital, while for hybrid persistence, the dominant factors are business characteristics and personality. Finally, we show that results are heterogeneous across subgroups. In particular, formerly-unemployed founders do not differ in survival chances, but they are more likely to lack a high psychological commitment to their business ventures.
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 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.
Being ignorant of key aspects of a strategic interaction can represent an advantage rather than a handicap. We study one particular context in which ignorance can be beneficial: iterated strategic interactions in which voluntary cooperation may be sustained into the final round if players voluntarily forego knowledge about the time horizon. We experimentally examine this option to remain ignorant about the time horizon in a finitely repeated two-person prisoners’ dilemma game. We confirm that pairs without horizon knowledge avoid the drop in cooperation that otherwise occurs toward the end of the game. However, this effect is superposed by cooperation declining more rapidly in pairs without horizon knowledge during the middle phase of the game, especially if players do not know that the other player also wanted to remain ignorant of the time horizon.