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The German start-up subsidy (SUS) program for the unemployed has recently undergone a major makeover, altering its institutional setup, adding an additional layer of selection and leading to ambiguous predictions of the program's effectiveness. Using propensity score matching (PSM) as our main empirical approach, we provide estimates of long-term effects of the post-reform subsidy on individual employment prospects and labor market earnings up to 40 months after entering the program. Our results suggest large and persistent long-term effects of the subsidy on employment probabilities and net earned income. These effects are larger than what was estimated for the pre-reform program. Extensive sensitivity analyses within the standard PSM framework reveal that the results are robust to different choices regarding the implementation of the weighting procedure and also with respect to deviations from the conditional independence assumption. As a further assessment of the results' sensitivity, we go beyond the standard selection-on-observables approach and employ an instrumental variable setup using regional variation in the likelihood of receiving treatment. Here, we exploit the fact that the reform increased the discretionary power of local employment agencies in allocating active labor market policy funds, allowing us to obtain a measure of local preferences for SUS as the program of choice. The results based on this approach give rise to similar estimates. Thus, our results indicating that SUS are still an effective active labor market program after the reform do not appear to be driven by "hidden bias."
Pandemic depression
(2022)
We investigate the effect of the COVID-19 pandemic on self-employed people’s mental health. Using representative longitudinal survey data from Germany, we reveal differential effects by gender: whereas self-employed women experienced a substantial deterioration in their mental health, self-employed men displayed no significant changes up to early 2021. Financial losses are important in explaining these differences. In addition, we find larger mental health responses among self-employed women who were directly affected by government-imposed restrictions and bore an increased childcare burden due to school and daycare closures. We also find that self-employed individuals who are more resilient coped better with the crisis.
As the policy debate on entrepreneurship increasingly centers on firm growth in terms of job creation, it is important to understand whether the personality of entrepreneurs drives the first hiring in their firms. Using the German Socio-Economic Panel (SOEP), we analyze to what extent personality traits influence the probability of becoming an employer. The results indicate that personality matters. Risk tolerance unfolds the strongest influence on hiring, shortening the time until entrepreneurs hire their first employee; the effect size of a one-standard-deviation increase in risk tolerance is similar to that of having a university degree. Moreover, individuals who are more open to experience, more conscientious, and more trustful are more likely to hire upon establishing their business.
Based on a large, representative German household panel, we investigate to what extent the personality of individuals influences the entry decision into and the exit decision from self-employment. We reveal that some traits, such as openness to experience, extraversion, and risk tolerance affect entry, but different ones, such as agreeableness or different parameter values of risk tolerance, affect exit from self-employment. Only locus of control has a similar influence on the entry and exit decisions. The explanatory power of all observed traits among all observable variables amounts to 30 %, with risk tolerance, locus of control, and openness having the highest explanatory power.
Many countries support business start-ups to spur economic growth and reduce unemployment with different programmes. Evaluation studies of such programmes commonly rely on the conditional independence assumption (CIA), allowing a causal interpretation of the results only if all relevant variables affecting participation and success are accounted for. While the entrepreneurship literature has emphasised the important role of personality traits as predictors for start-up decisions and business success, these variables were neglected in evaluation studies so far due to data limitations. In this paper, we evaluate a new start-up subsidy for unemployed individuals in Germany using propensity score matching under the CIA. Having access to rich administrative-survey data allows us to incorporate usually unobserved personality measures in the evaluation and investigate their impact on the estimated effects. We find strong positive effects on labour market reintegration and earned income for the new programme. Most importantly, results including and excluding individuals׳ personalities do not differ significantly, implying that concerns about potential overestimation of programme effects in the absence of personality measures might be less justified if the set of other control variables is rich enough.
Sin embargo, todavia no se han analizado los efectos potencialmente heterogeneos de los programas para proyectos empresariales en los diferentes mercados laborales de ambito regional. Las restricciones en la demanda de empleo en areas mas desfavorecidas generalmente hacen aumentar el numero de personas que aprovechan estos programas porque las ofertas laborales son limitadas. Sin embargo, la supervivencia de empresas en estas areas es tambien mas baja, de modo que sigue sin estar claro el efecto general. Basandonos en datos alemanes, observamos que el proceso de creacion, el desarrollo de negocios y la eficacia de los programas estan influenciados por las condiciones economicas imperantes en el momento de la creacion de la empresa.
Reinhard Hujer
(2020)
We analyze workers’ risk preferences and training investments. Our conceptual framework differentiates between the investment risk and insurance mechanisms underpinning training decisions. Investment risk leads risk-averse workers to train less; they undertake more training if it insures them against future losses. We use the German Socio-Economic Panel (SOEP) to demonstrate that risk affinity is associated with more training, implying that, on average, investment risks dominate the insurance benefits of training. Crucially, this relationship is evident only for general training; there is no relationship between risk attitudes and specific training. Thus, consistent with our conceptual framework, risk preferences matter more when skills are transferable – and workers have a vested interest in training outcomes – than when they are not. Finally, we provide evidence that the insurance benefits of training are concentrated among workers with uncertain employment relationships or limited access to public insurance schemes.
Self-efficacy reflects the self-belief that one can persistently perform difficult and novel tasks while coping with adversity. As such beliefs reflect how individuals behave, think, and act, they are key for successful entrepreneurial activities. While existing literature mainly analyzes the influence of the task-related construct of entrepreneurial self-efficacy, we take a different perspective and investigate, based on a representative sample of 1,405 German business founders, how the personality characteristic of generalized self-efficacy influences start-up performance as measured by a broad set of business outcomes up to 19 months after business creation. Outcomes include start-up survival and entrepreneurial income, as well as growth-oriented outcomes such as job creation and innovation. We find statistically significant and economically important positive effects of high scores of self-efficacy on start-up survival and entrepreneurial income, which become even stronger when focusing on the growth-oriented outcome of innovation. Furthermore, we observe that generalized self-efficacy is similarly distributed between female and male business founders, with effects being partly stronger for female entrepreneurs. Our findings are important for policy instruments that are meant to support firm growth by facilitating the design of more target-oriented offers for training, coaching, and entrepreneurial incubators.
Labor market policies, such as training and sanctions, are commonly used to bring workers back to work. By analogy to medical treatments, exposure to these tools can have side effects. We study the effects on health using individual-level population registers on labor market outcomes, drug prescriptions, and sickness absence, comparing outcomes before and after exposure to training and sanctions. Training improves cardiovascular and mental health, and lowers sickness absence. This is likely to be the result of the instantaneous features of participation, such as the adoption of a more rigorous daily routine, rather than improved employment prospects. Benefits sanctions cause a short-run deterioration of mental health.
Offering unemployed individuals a subsidy to become self-employed is a widespread active labor market policy strategy. Previous studies have illustrated its high effectiveness to help participants escaping unemployment and improving their labor market prospects compared to other unemployed individuals. However, the examination of start-up subsidies from a business perspective has only received little attention to date. Using a new dataset based on a survey allows us to compare subsidized start-ups out of unemployment with regular business founders, with respect to not only personal characteristics but also business outcomes. The results indicate that previously unemployed entrepreneurs face disadvantages in variables correlated with entrepreneurial ability and access to capital. Nineteen months after start-up, the subsidized businesses experience higher survival, but lag behind regular business founders in terms of income, business growth and innovation. Moreover, we show that expected deadweight effects related to start-up subsidies occur on a (much) lower scale than usually assumed.
Dealing with spam is very costly, and many organizations have tried to reduce spam-related costs by installing spam filters. Relying on modern econometric methods to reduce the selection bias of installing a spam filter, we use a unique data setting implemented at a German university to measure the costs associated with spam and the costs savings of spam filters. Our methodological framework accounts for effect heterogeneity and can be easily used to estimate the effect of other IS technologies implemented in organizations.
The majority of costs stem from the time that employees spend identifying and deleting spam, amounting to an average of approximately five minutes per employee per day. Our analysis, which accounts for selection bias, finds that the installation of a spam filter reduces these costs by roughly one third. Failing to account for the selection bias would lead to a result that suggests that installing a spam filter does not reduce working time losses.
However, cost savings only occur when the spam burden is high, indicating that spam filters do not necessarily reduce costs and are therefore no universal remedy. The analysis further shows that spam filters alone are a countermeasure against spam that exhibits only limited effectiveness because they only reduce costs by one third.
We propose a combined approach of propensity score matching with difference-in-differences methods for reducing selection biases of products being reviewed by critics. Critics' decision to review products may be driven by observable (e.g., star power) and unobservable (e.g., critics' individual preferences) factors, raising the question of reverse causality and selection biases. Our proposed approach enables to rigorously control for selection biases by observable and unobservable characteristics. We apply our methodological framework on data from the German book market and estimate the sales effect of a well-known TV critic. We identify substantial selection effects of individual critics, which result in serious underestimation of the short-term effect (up to 29 %) and the long-term effect (up to 37 %). The results emphasize the relevance of the proposed methodological framework by demonstrating that observable and unobservable factors drive selection effects.
Why do entrepreneurship rates differ so markedly by gender? Using data from a large representative German household panel, we investigate to what extent personality traits, human capital, and the employment history influence the start-up decision and can explain the gender gap in entrepreneurship. Applying a decomposition analysis, we observe that the higher risk aversion among women explains a large share of the entrepreneurial gender gap. We also find an education effect contributing to the gender difference. In contrast, the Big Five model and the current employment state have effects in the opposite direction, meaning that the gender gap in entrepreneurial entry would be even larger if women had the same scores and the same employment status as men. (JEL codes: L26, J16, D81, J24, M13).
Risk attitudes influence the complete life cycle of entrepreneurs. Whereas recent research underpins the theoretical proposition of a positive correlation between risk attitudes and the decision to become self-employed, the effects on survival are not as straightforward. Psychological research posits an inverse U-shaped relationship between risk attitudes and entrepreneurial survival. On the basis of experimentally validated data of the German Socio-Economic Panel (SOEP), we examine the extent to which risk attitudes influence survival rates in self-employment in Germany. The empirical results confirm that persons whose risk attitudes are in the medium range survive significantly longer as entrepreneurs than do persons with particularly low or high risk attitudes.
This paper evaluates the short-run impact of the introduction of a statutory minimum wage in Germany on the hourly wages and monthly earnings of workers targeted by the reform. We first provide detailed descriptive evidence of changes to the wage structure in particular at the bottom of the distribution and distinguish between trends for regularly employed and marginally employed workers. In the causal analysis, we then employ a differential trend adjusted difference-in-differences (DTADD) strategy to identify the extent to which these changes in wages and earnings can be attributed to the minimum wage introduction. We find that the minimum wage introduction can account for hourly wage growth in the order of roughly 6.5 % or (sic)0.45/hour and an increase in monthly earnings of 6.6 % or (sic)53/month. Despite finding wage growth at the bottom of the distribution, the paper documents widespread non-compliance with the mandated wage floor of (sic)8.50/hour.
Predicting entrepreneurial development based on individual and business-related characteristics is a key objective of entrepreneurship research. In this context, we investigate whether the motives of becoming an entrepreneur influence the subsequent entrepreneurial development. In our analysis, we examine a broad range of business outcomes including survival and income, as well as job creation, and expansion and innovation activities for up to 40 months after business formation. Using the self-determination theory as conceptual background, we aggregate the start-up motives into a continuous motivational index. We show – based on a unique dataset of German start-ups from unemployment and non-unemployment – that the later business performance is better, the higher they score on this index. Effects are particularly strong for growth-oriented outcomes like innovation and expansion activities. In a next step, we examine three underlying motivational categories that we term opportunity, career ambition, and necessity. We show that individuals driven by opportunity motives perform better in terms of innovation and business expansion activities, while career ambition is positively associated with survival, income, and the probability of hiring employees. All effects are robust to the inclusion of a large battery of covariates that are proven to be important determinants of entrepreneurial performance.
The current German start-up subsidy for unemployed individuals underwent a major reform in 2011 that altered key parameters of the program, leading to ambiguous ex ante predictions on the post-reform effectiveness of the program, making a new evaluation necessary. In our descriptive analysis, we find that participants after the reform differ significantly from pre-reform participants in terms of important characteristics and subsequent labor market performance. Our causal analysis reveals positive and sizable treatment effects on the treated regarding employment and income that are larger effects than what was estimated for the pre-reform program. Potential reasons for this are discussed.