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Small Business Economics

, Volume 45, Issue 1, pp 165–190 | Cite as

Subsidized start-ups out of unemployment: a comparison to regular business start-ups

  • Marco CaliendoEmail author
  • Jens Hogenacker
  • Steffen Künn
  • Frank Wießner
Article

Abstract

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.

Keywords

Entrepreneurship Start-up subsidies Evaluation  Deadweight effects Innovation 

JEL Classifications

C14 L26 J68 

Notes

Acknowledgments

The authors thank Mirjam van Praag and two anonymous referees for helpful comments and suggestions. We further thank participants at the 2013 IECER in Brescia, the 2013 ESPE conference in Aarhus, the 2013 IZA Summer School and seminars at University of Potsdam and University of Jena for helpful discussions and comments. Financial support of the Institute for Employment Research (IAB) in Nuremberg under the research grant No. 1143 is gratefully acknowledged. We further thank the Chambers of Industry and Commerce, and Chambers of Crafts for their active support in constructing the data. A Supplementary Appendix is available online at: http://ftp.iza.org/dp8817_supplement.pdf.

Supplementary material

11187_2015_9646_MOESM1_ESM.pdf (235 kb)
Supplementary material 1 (pdf 236 KB)

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  • Marco Caliendo
    • 1
    • 2
    • 3
    • 4
    Email author
  • Jens Hogenacker
    • 1
    • 2
  • Steffen Künn
    • 2
  • Frank Wießner
    • 4
  1. 1.Chair of Empirical EconomicsUniversity of PotsdamPotsdamGermany
  2. 2.IZABonnGermany
  3. 3.DIWBerlinGermany
  4. 4.IABNurembergGermany

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