Advertisement

Small Business Economics

, Volume 49, Issue 4, pp 889–918 | Cite as

Active labor market programs’ effects on entrepreneurship and unemployment

  • Catherine LaffineurEmail author
  • Saulo Dubard Barbosa
  • Alain Fayolle
  • Emeran Nziali
Article

Abstract

Many countries are turning to active labor market programs (ALMP) to increase individuals’ incentive to start a business and to reduce unemployment, but research on the effectiveness of such programs has produced mixed results and is still inconclusive at the macroeconomic level. This article examines the importance of ALMP targeted at entrepreneurship to explain cross-country differences in aggregate entrepreneurship rate. By using GEM data over the period 2002–2013 on OECD countries, our results show a positive impact of ALMP on the rate of necessity entrepreneurship but no significant effect on the rate of opportunity entrepreneurship. We further established that generous unemployment benefits reduce the positive outcome of ALMP on the aggregate rate of necessity entrepreneurship. Moreover, because most businesses started out of necessity do not create new jobs, we find that the economic spin-off of such programs in terms of unemployment reduction is very limited.

Keywords

Entrepreneurship Active labor market programs Start-up incentives Unemployment benefits Unemployment 

JEL classifications

M21 J65 H50 

Supplementary material

11187_2017_9857_MOESM1_ESM.docx (17 kb)
ESM 1 (DOCX 17 kb)

References

  1. Acs, Z. J. (2008). Foundations of high impact entrepreneurship. USA: Now Publishers Inc..Google Scholar
  2. Acs, Z. J., & Laszlo, S. (2007). Entrepreneurship, economic growth and public policy. Small Business Economics, 28, 109–122.CrossRefGoogle Scholar
  3. Acs, Z. J., & Varga, A. (2005). Entrepreneurship, agglomeration and technological change. Small Business Economics, 24, 323–334.CrossRefGoogle Scholar
  4. Acs, Z.J., Audretsch, D.B, & Evans, D.S.. 1994. Why Does the Self- Employment Rate Vary Across Countries and Over Time? Cepr discussion papers, C.E.P.R. Discussion Papers.Google Scholar
  5. Acs, Z. J., Morck, R. K., & Yeung, B. (2001). Entrepreneurship, globalization, and public policy. Journal of International Management, 7(3), 235–251.CrossRefGoogle Scholar
  6. Acs, Z. J., Åstebro, T., Audretsch, D. B., & Robinson, D. T. (2016). Public policy to promote entrepreneurship: A call to arms. Small Business Economics, 47(1), 35–51.CrossRefGoogle Scholar
  7. Alba-Ramirez, A. (1994). Self-employment in the midst of unemployment: The case of Spain and the United States. Applied Economics, 26(3), 189–204.CrossRefGoogle Scholar
  8. Amoros, J.E., & Bosma, N. (2014). GEM 2013 Global Report. Technical Report, Global Entrepreneurship Monitor Annual Report.Google Scholar
  9. Arin, K., Huang, V., Minniti, M., Nandialath, A., & Reich, O. (2015). Revisiting the determinants of entrepreneurship a Bayesian approach. Journal of Management, 41(2), 607–631.CrossRefGoogle Scholar
  10. Åstebro, T. (2017). The private financial gains to entrepreneurship: Is it a good use of public money to encourage individuals to become entrepreneurs? Small Business Economics, 48(2), 323–329.Google Scholar
  11. Åstebro, T., & Tåg, J. (2015). Entrepreneurship and job creation. IFN Working Paper No. 1059. Available at SSRN: http://ssrn.com/abstract=2576044.
  12. Audretsch, D. B. (2007). Entrepreneurship capital and economic growth. Oxford Review of Economic Policy, 23(1), 63–78.CrossRefGoogle Scholar
  13. Baptista, R., Karaöz, M., & Mendonça, J. (2014). The impact of human capital on the early success of necessity versus opportunity-based entrepreneurs. Small Business Economics, 42, 831–847.CrossRefGoogle Scholar
  14. Barlevy, G. 2007. On the cyclicality of research and development. The American Economic Review, 1131–1164.Google Scholar
  15. Baumgartner, H., & Caliendo, M. (2008). Turning unemployment into self-employment: Effectiveness of two start-up Programmes. Oxford Bulletin of Economics and Statistics, 70(3), 347–373.CrossRefGoogle Scholar
  16. Baumol, W. J. (1990). Entrepreneurship: Productive, unproductive, and destructive. The Journal of Political Economy, 98(5), 893–921.CrossRefGoogle Scholar
  17. Baumol, W. J., & Strom, R. J. (2007). Entrepreneurship and economic growth. Strategic Entrepreneurship Journal, 1(3–4), 233–237.CrossRefGoogle Scholar
  18. Benzing, C., & Chu, H. M. (2009). A comparison of the motivations of small business owners in Africa. Journal of Small Business and Enterprise Development, 16(1), 60–77.CrossRefGoogle Scholar
  19. Bergmann, H., & Sternberg, R. (2007). The changing face of entrepreneurship in Germany. Small Business Economics, 28, 205–221.CrossRefGoogle Scholar
  20. Blanchflower, D. G. (2000). Self-employment in OECD countries. Labour Economics, 7(5), 471–505.CrossRefGoogle Scholar
  21. Blanchflower, D. G. (2004). Self-employment: More may not be better. Swedish Economic Policy Review, 11(2), 15–74.Google Scholar
  22. Blanchflower, D. G., & Oswald, A. J. (1998). What makes an entrepreneur? Journal of Labor Economics, 16(1), 26–60.CrossRefGoogle Scholar
  23. Blau, D. M. (1987). A time-series analysis of self-employment in the United States. The Journal of Political Economy, 95(3), 445–467.Google Scholar
  24. Block, J. H., & Koellinger, P. (2009). I can’t get no satisfaction – Necessity entrepreneurship and procedural utility. Kyklos, 62(2), 191–209.CrossRefGoogle Scholar
  25. Block, J. H., & Wagner, M. (2010). Necessity and opportunity entrepreneurs in Germany: Characteristics and earnings differentials. Schmalenbach Business Review : ZFBF, 62(2), 154–174.CrossRefGoogle Scholar
  26. Block, J. H., Kohn, K., Miller, D., & Ulrick, K. (2015a). Necessity entrepreneurship and competitive strategy. Small Business Economics, 44, 37–54.CrossRefGoogle Scholar
  27. Block, J. H., Sandner, P., & Spiegel, F. (2015b). How do risk attitudes differ within the group of entrepreneurs? The role of motivation and procedural utility. Journal of Small Business Management, 53(1), 183–206.CrossRefGoogle Scholar
  28. Boone, J., & Van Ours, J.C. 2004. Effective active labor market policies. Technical Report, CEPR Discussion paper.Google Scholar
  29. Brewer, J., & Gibson, S. W. (Eds.). (2014). Necessity entrepreneurs: Microenterprise education and economic development. USA: Edward Elgar Publishing.Google Scholar
  30. Bruce, D. (2000). Effects of the United States tax system on transitions into selfemployment. Labour Economics, 7(5), 545–574.CrossRefGoogle Scholar
  31. Buchmann, M., Kriesi, I., & Sacchi, S. (2009). Labour market, job opportunities, and transitions to self-employment: Evidence from Switzerland from the mid-1960s to the late 1980s. European Sociological Review, 25(5), 569–583.CrossRefGoogle Scholar
  32. Burke, A. E., FitzRoy, F. R., & Nolan, M. A. (2000). When less is more: Distinguishing between entrepreneurial choice and performance. Oxford Bulletin of Economics and Statistics, 62(5), 565–587.CrossRefGoogle Scholar
  33. Cabral, Luis M.B., & Mata, Jose. 2003. On the evolution of the firm size distribution: Facts and theory. American economic review, 1075–1090.Google Scholar
  34. Caliendo, M., & Kritikos, A. (2010). Start-ups by the unemployed: Characteristics, survival and direct employment effects. Small Business Economics, 35(1), 71–92.CrossRefGoogle Scholar
  35. Caliendo, M., Hogenacker, J., Künn, S., & Wießner, F. (2015). Subsidized start-ups out of unemployment: A comparison to regular business startups. Small Business Economics, 45(1), 165–190.CrossRefGoogle Scholar
  36. Carrasco, R. (1999). Transitions to and from self-employment in Spain: An empirical analysis. Oxford Bulletin of Economics and Statistics, 61(3), 315–341.CrossRefGoogle Scholar
  37. Carree, M. A., & Thurik, R. A. (2008). The lag structure of the impact of business ownership on economic performance in OECD countries. Small Business Economics, 30(1), 101–110.CrossRefGoogle Scholar
  38. Cheung, O. L. (2014). Are we seeing ?Necessity?Or ?Opportunity?Entrepreneurs at large? Research in Business and Economics Journal, 9, 1.Google Scholar
  39. Dawson, C., Henley, A., & Latreille, P. L. (2009). “why do individuals choose self-employment?” Iza discussion papers. Bonn: Institute for the Study of Labor (IZA).Google Scholar
  40. Delmar, F., & Wiklund, J. (2008). The effect of small business managers? Growth motivation on firm growth: A longitudinal study. Entrepreneurship Theory and Practice, 32(3), 437–457.CrossRefGoogle Scholar
  41. Djankov, S., Ganser, T., McLiesh, C., Ramalho, R., & Shleifer, A. (2010). The Effect of Corporate Taxes on Investment and Entrepreneurship. American Economic Journal: Macroeconomics, 31–64.Google Scholar
  42. Elmeskov, Jørgen, Martin, John P., & Scarpetta, Stefano. (1998). Key lessons for labour market reforms: Evidence from OECD countries’ experience. Swedish economic policy review 5(2).Google Scholar
  43. European Commission. (2014). “activating jobseekers through entrepreneurship: Start-up incentives in Europe.” technical report.Google Scholar
  44. European Employment Policy Observatory Review (2014) “EEPO review on activating job-seekers through entrepreneurship: start-up incentives in Europe”Google Scholar
  45. Evans, David S, & Jovanovic, Boyan. 1989. An estimated model of entrepreneurial choice under liquidity constraints. The Journal of Political Economy, 808–827.Google Scholar
  46. Evans D., Leighton, L. S. (1989). Some empirical aspects of entrepreneurship. American Economic Review, 79(3), 519–535.Google Scholar
  47. Evans, D. S., & Leighton, L. S. (1990). Small business formation by unemployed and employed workers. Small Business Economics, 2(4), 319–330.CrossRefGoogle Scholar
  48. Fernandez, C., Ley, E., & Steel, M. F. J. (2001). Model uncertainty in cross-country growth regressions. Journal of Applied Econometrics, 16(5), 563–576.CrossRefGoogle Scholar
  49. Foster, D. P., & George, E. I. (1994). The risk inflation criterion for multiple regression. The Annals of Statistics, 1947–1975.Google Scholar
  50. Gentry, W.M., & Hubbard, R.G.. 2000. Tax policy and entrepreneurial entry. American Economic Review, 283–287.Google Scholar
  51. Giacomin, O., Guyot, J.-L., Janssen, F., Lohest, O., et al. (2007). “novice creators: Personal identity and push pull dynamics.” technical report. Belgium: Louvain School of Management.Google Scholar
  52. Gordon, R. H., & Cullen, J. B. (2002). “taxes and entrepreneurial activity: Theory and evidence for the US.” technical report. New York: National Bureau of Economic Research.CrossRefGoogle Scholar
  53. Henrekson, M. & Sanandaji, T. 2014. Small business activity does not measure entrepreneurship. Proceedings of the National Academy of Sciences. Google Scholar
  54. Hessels, J., Van Stel, A.J., Brouwer, P., & Wennekers, S.. 2007. Social security arrangements and early-stage entrepreneurial activity. Comparative Labor Law & Policy Journal 28(4).Google Scholar
  55. Hessels, J., van Gelderen, M., & Thurik, R. (2008). Drivers of entrepreneurial aspirations at the country level: The role of start-up motivations and social security. International Entrepreneurship and Management Journal, 4(4), 401–417.CrossRefGoogle Scholar
  56. Hombert, J., Schoar, A., Sraer, D., & Thesmar, D. (2013). Should the Government Make It Safe to Start a Business? Evidence From a French Reform.Google Scholar
  57. Howell, D. R., & Rehm, M. (2009). Unemployment compensation and high European unemployment: A reassessment with new benefit indicators. Oxford Review of Economic Policy, 25(1), 60–93.CrossRefGoogle Scholar
  58. Hurst, E., & Pugsley, B. (2011). What do small businesses do? Brooking Papers on Economic Activity, 43(2), 73–142.CrossRefGoogle Scholar
  59. Kass, R. E., & Wasserman, L. (1995). A reference Bayesian test for nested hypotheses and its relationship to the Schwarz criterion. Journal of the American Statistical Association, 90(431), 928–934.CrossRefGoogle Scholar
  60. Keupp, M., & Gassmann, O.. 2009. The past and the future of international entrepreneurship: a review and suggestions for developing the field. Journal of Management.Google Scholar
  61. Klapper, Leora, Amit, Raphael, & Guillén, Mauro F.. 2010. Entrepreneurship and firm formation across countries. In International differences in entrepreneurship (pp. 129–158). University of Chicago Press.Google Scholar
  62. Koellinger, P. (2008). Why are some entrepreneurs more innovative than others? Small Business Economics, 31(1), 21–37.CrossRefGoogle Scholar
  63. Koellinger, P., & Minniti, M. (2009). Unemployment benefits crowd out nascent entrepreneurial activity. Economics Letters, 103(2), 96–98.CrossRefGoogle Scholar
  64. Layard, P., Richard, G., Nickell, S. J., & Jackman, R. (2005). Unemployment: Macroeconomic performance and the labour market. Oxford: Oxford University Press.CrossRefGoogle Scholar
  65. Lenihan, H. (2004). Evaluating Irish industrial policy in terms of deadweight and displacement: A quantitative methodological approach. Applied Economics, 36(3), 229–252.CrossRefGoogle Scholar
  66. Lerner, J. (2009). Boulevard of broken dreams – Why public efforts to boost entrepreneurship and venture capital have failed – And what to do about it. Princeton: Princeton University Press.Google Scholar
  67. Liang, F., Paulo, R., Molina, G., Clyde, M.A., & Berger, J.O.. 2008. Mixtures of g priors for Bayesian variable selection. Journal of the American Statistical Association 103(481).Google Scholar
  68. Masanjala, W. H., & Papageorgiou, C. (2008). Rough and lonely road to prosperity: A reexamination of the sources of growth in Africa using Bayesian model averaging. Journal of Applied Econometrics, 23(5), 671–682.CrossRefGoogle Scholar
  69. Masuda, T. (2006). The determinants of latent entrepreneurship in Japan. Small Business Economics, 26(3), 227–240.CrossRefGoogle Scholar
  70. Minniti, M. (2008). The role of government policy on entrepreneurial activity: Productive, unproductive, or destructive? Entrepreneurship Theory and Practice, 32(5), 779–790.CrossRefGoogle Scholar
  71. Minniti, M., Bygrave, W. D., & Autio, E. (2005). Global Entrepreneurship Monitor: 2005 Executive Report. Wellesley: Babson College.Google Scholar
  72. Moore, R. L. (1983). Self-employment and the incidence of the payroll tax. National Tax Journal, pp., 491–501.Google Scholar
  73. Nakara, W. A., & Fayolle, A. (2012). Les “bad” pratiques d’accompagnement à la création d’entreprise : Le cas des entrepreneurs par nécessité. Revue Française de Gestion, 228–229, 231–251.Google Scholar
  74. Nickell, S., Nunziata, L., & Ochel, W. (2005). Unemployment in the OECD since the 1960s. What do we know?*. The Economic Journal, 115(500), 1–27.CrossRefGoogle Scholar
  75. North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  76. OECD (2007). Benefits and wages 2007 OECD indicators. Paris: OECD Publishing.Google Scholar
  77. Parker, S.C. 1996. A time series model of self-employment under uncertainty. Economica, 459–475.Google Scholar
  78. Parker, S. (2004). The economics of self-employment and entrepreneurship. Cambridge: Cambridge University Press.Google Scholar
  79. Parker, S. C. (2007). Policymakers beware! In D. B. Audretsch, I. Grilo, & A. R. Thurik (Eds.), Handbook of research on entrepreneurship policy (pp. 54–63). Cheltenham: Edward Elgar.Google Scholar
  80. Parker, S. C. (2009). The economics of entrepreneurship. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  81. Parker, S.C., & Robson, M.T.. 2004. Explaining international variations in selfemployment: evidence from a panel of OECD countries. Southern Economic Journal, 287–301.Google Scholar
  82. Poschke, M. (2013). ‘entrepreneurs out of necessity’: A snapshot. Applied Economic Letters, 20, 658–663.CrossRefGoogle Scholar
  83. Rampini, A. (2004). Entrepreneurial activity, risk, and the business cycle. Journal of Monetary Economics, 51(3), 555–573.CrossRefGoogle Scholar
  84. Reynolds, P.D., & Hechavarria, D.. 2008. Global entrepreneurship monitor: Adult population survey data sets: 1998–2003 (ICPSR Archive, Project 20320). Ann Arbor, MI.Google Scholar
  85. Reynolds, Paul D., Michael, Camp S., Bygrave, William D., Erkko, Autio, & Hay, Michael. 2001. Global Entrepreneurship Monitor: 2001 Executive Report. London: Babson College. Kauffman Center for Entrepreneurial Leadership, London Business School, vol. 57.Google Scholar
  86. Røed, K., & Skogstrøm, J. F. (2014). Unemployment insurance and entrepreneurship. Labour, 28(4), 430–448.CrossRefGoogle Scholar
  87. Román, C., Congregado, E., & Millán, J.-M. (2013). Start-up incentives: Entrepreneurship policy or active labour market programme? Journal of Business Venturing, 28(1), 151–175.CrossRefGoogle Scholar
  88. Sanandaji, T., & Leeson, P. T. (2013). Billionaires. Industrial and Corporate Change, 22(1), 313–337.CrossRefGoogle Scholar
  89. Schuetze, H. J. (2000). Taxes, economic conditions and recent trends in male selfemployment: A Canada–US comparison. Labour Economics, 7(5), 507–544.CrossRefGoogle Scholar
  90. Shane, S. A. (2003). A general theory of entrepreneurship: The individual opportunity nexus. Cheltenham: Edward Elgar Publishing.CrossRefGoogle Scholar
  91. Shane, S. A. (2008). The illusions of entrepreneurship: The costly myths that entrepreneurs, investors, and policy makers live by. New Haven: Yale University Press.Google Scholar
  92. Shane, S. A. (2009). Why encouraging more people to become entrepreneurs is bad public policy. Small Business Economics, 33(2), 141–149.CrossRefGoogle Scholar
  93. Sobel, R. S., & King, K. A. (2008). Does school choice increase the rate of youth entrepreneurship? Economics of Education Review, 27(4), 429–438.CrossRefGoogle Scholar
  94. Staber, U., & Bögenhold, D. (1993). Self-employment: A study of seventeen OECD countries. Industrial Relations Journal, 24(2), 126–137.CrossRefGoogle Scholar
  95. Stabile, M. (2004). Payroll taxes and the decision to be self-employed. International Tax and Public Finance, 11(1), 31–53.CrossRefGoogle Scholar
  96. Storey, D. J. (1991). The birth of new firms: Does unemployment matter? A review of the evidence. Small Business Economics, 3(3), 167–178.CrossRefGoogle Scholar
  97. Thurik, R., Wennekers, S., & Uhlaner, L. M. (2002). Entrepreneurship and economic performance: A macro perspective. International Journal of Entrepreneurship, 1(2), 157–179.Google Scholar
  98. Thurik, A. R., Carree, M. A., van Stel, A., & Audretsch, D. B. (2008). Does self-employment reduce unemployment? Journal of Business Venturing, 23(6), 673–686.CrossRefGoogle Scholar
  99. Tokila, A., Haapanen, M., & Ritsilä, J. (2008). Evaluation of investment subsidies: When is deadweight zero? International Review of Applied Economics, 22(5), 585–600.CrossRefGoogle Scholar
  100. Torres, O., & Eminet, A.. 2004. Rapport 2003–2004 sur l’entrepreneuriat en France et dans le monde. Technical Report, Global Entrepreneurship Monitor Annual Report.Google Scholar
  101. Valliere, D., & Peterson, R. (2009). Entrepreneurship and economic growth: Evidence from emerging and developed countries. Entrepreneurship & Regional Development, 21(5–6), 459–480.CrossRefGoogle Scholar
  102. Wennberg, K., Delmar, F., & McKelvie, A. (2016). Variable risk preferences in new firm growth and survival. Journal of Business Venturing, 31, 408–427.CrossRefGoogle Scholar
  103. Wennekers, S., van Wennekers, A., Thurik, R., & Reynolds, P. (2005). Nascent entrepreneurship and the level of economic development. Small Business Economics, 24(3), 293–309 (04).CrossRefGoogle Scholar
  104. Wennekers, S., Van Stel, A., Carree, M., & Thurik, R. (2010). The relationship between entrepreneurship and economic development: Is it U-shaped? USA: Now Publishers Inc..Google Scholar
  105. Williams, N., & Williams, C. C. (2012). Evaluating the socio-spatial contingency of entrepreneurial motivations: A case study of English deprived urban neighbourhoods. Entrepreneurship & Regional Development, 24(7–8), 661–684.CrossRefGoogle Scholar
  106. Wong, P. K., Ho, Y. P., & Autio, E. (2005). Entrepreneurship, innovation and economic growth: Evidence from GEM data. Small Business Economics, 24(3), 335–350.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  • Catherine Laffineur
    • 1
    • 2
    Email author
  • Saulo Dubard Barbosa
    • 2
  • Alain Fayolle
    • 2
  • Emeran Nziali
    • 2
  1. 1.Université Côte d’Azur, GREDEG-CNRSNiceFrance
  2. 2.EM LyonEcullyFrance

Personalised recommendations