Review of Empirical Studies on Self-Employment out of Unemployment: Do Self-Employment Policies Make a Positive Impact?

Abstract

The role of self-employment policies as a way out of unemployment has been challenged. Shane (2009) stated that incentives for starting low growth companies should be eliminated as they attract the worst entrepreneurs. However, scientific evidence analysing outcomes of self-employment policies is, with the exception of Germany, scarce. We review 18 empirical studies published in the past ten years that focus on self-employment out of unemployment and summarize the applied approach, used data, variables, control groups and reported findings. Most studies find positive effects of self-employment policies on employment status and personal income of former unemployed individuals and increased survival rates of subsidized businesses. On the other hand, subsidized businesses underperform regular ones. We emphasize that growth cannot be taken as an all-embracing policy goal. There are other goals such as maintaining work-related skills. We suggest avenues for future research and policy recommendations including comparison of effects of various active labour market policies and taking into account local conditions.

Keywords: entrepreneurship policies, self-employment policies, start-up subsidies, counterfactual evaluation, quantitative review, evidence based policies