Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323542 
Year of Publication: 
2024
Citation: 
[Journal:] Small Business Economics [ISSN:] 1573-0913 [Volume:] 64 [Issue:] 4 [Publisher:] Springer US [Place:] New York, NY [Year:] 2024 [Pages:] 1565-1600
Publisher: 
Springer US, New York, NY
Abstract: 
Business creation is economically important, and unemployment precedes the creation of a substantial share of new firms. Yet, most research has focused on analyzing the effects of unemployment insurance policies on re-employment outcomes, ignoring self-employment. In this paper, we analyze how the potential duration of unemployment benefits, a fundamental design choice of unemployment insurance systems, affects whether new firms are founded out of opportunity or necessity and their growth potential. To this end, we construct a comprehensive dataset on German firm founders that links administrative social insurance information with business survey data. Exploiting reform and age-related exogenous variation in the potential duration of unemployment benefits, we find that longer potential benefit duration implies longer actual unemployment and, as a consequence, more necessity entrepreneurship and worse startup outcomes in terms of sales and employment growth. We explain this overall effect of potential benefit duration through a mix of compositional and individual-level duration effects. Our findings underline that new firms started out of unemployment are a highly heterogeneous group and suggest that the (optimal) design of unemployment insurance systems has important externalities on whether innovation- and growth-oriented firms are started out of unemployment.
Subjects: 
Entrepreneurship
Unemployment insurance
Self-employment
Opportunity entrepreneurship
Fiscal externality
JEL: 
L26
M13
L11
L25
D22
J21
J23
J44
J62
J64
J65
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.