Online from: 1980
Subject Area: Economics
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|Title:||Start-up subsidies in East Germany: finally, a policy that works?|
|Author(s):||Marco Caliendo, (Institute for the Study of Labour (IZA), Bonn, Germany)|
|Citation:||Marco Caliendo, (2009) "Start-up subsidies in East Germany: finally, a policy that works?", International Journal of Manpower, Vol. 30 Iss: 7, pp.625 - 647|
|Keywords:||Business formation, Germany, Self employed workers, Subsidies|
|Article type:||Research paper|
|DOI:||10.1108/01437720910997326 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Acknowledgements:||The author thanks Ulf Rinne, two anonymous referees, and seminar participants at CRENoS/University of Cagliari for valuable comments. The usual disclaimer applies. The more detailed discussion paper version of this article is available at: http://ftp.iza.org/dp3360.pdf|
Purpose – The purpose of the paper is to estimate the effectiveness of two start-up programs (bridging allowance and start-up subsidy) in East Germany.
Design/methodology/approach – Using a combination of administrative data from the Federal Employment Agency and a follow-up survey (for roughly 1,300/1,000 participants/non-participants), the analysis is based on the conditional independence assumption. Kernel matching estimators are applied to estimate the treatment effects and test the sensitivity of the results using a conditional difference-in-differences approach.
Findings – At the end of the observation period both programs are effective: unemployment rates of participants are lower, and employment rates and personal income are higher when compared to non-participants. Additionally, first descriptive evidence of the additional employment effects through direct job creation is presented, which is quite significant for the bridging allowance and negligible for participants in the start-up subsidy.
Research limitations/implications – Participants in the start-up subsidy are in their third year of participation at the end of the observation period and mostly still receive further support (although at a reduced rate). Therefore, the results for this program have to be treated as preliminary.
Practical implications – In contrast to other active labor market programs that have been evaluated recently (including job-creation schemes and vocational training programs) this paper finds considerable positive effects for start-up subsidies. Hence, programs aimed at turning the unemployed into entrepreneurs may be a promising strategy in East Germany.
Originality/value – This is one of the first studies that allows inferences to be drawn about the effectiveness of start-up programs in East Germany. Most previous studies on the effectiveness of active labour market policies in the Eastern part of Germany neglected these programs.
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