Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222286
Authors: 
Camarero Garcia, Sebastian
Murmann, Martin
Year of Publication: 
2020
Series/Report no.: 
ZEW Discussion Papers 20-033
Abstract: 
Despite the importance of business creation for the economy and a relevant share of new firms being started out of unemployment, most research has focused on analyzing the effect of unemployment insurance (UI) policies on reemployment outcomes that ignore self-employment. In this paper, we assess how UI benefit duration affects the motivation for creating a startup while unemployed and the subsequent firms' success. To do so, we create a comprehensive dataset on founders in Germany that links administrative social insurance with survey data. Exploiting reform- and age-based exogenous variations in potential benefit duration (PBD) within the German UI system, we find that longer PBD leads to longer actual unemployment duration for those becoming self-employed. Furthermore, the UI duration elasticity for these individuals is higher than common estimates for those individuals becoming re-employed. With increasing unemployment benefit duration, the founders' outcomes in terms of self-assessed motivation, sales, and employment growth lessen. This overall causal effect of PBD can be rationalized with a mix of composition and individual-level duration effects. Therefore, our findings suggest that it is important to consider the fiscal externality of UI on startup success when it comes to the (optimal) design of UI systems.
Subjects: 
entrepreneurship
unemployment insurance
fiscal externality
JEL: 
D22
J21
J23
J44
J62
J64
J65
L11
L25
L26
M13
Document Type: 
Working Paper

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