Bank Loans, Start-up Subsidies and the Survival of the New Firms: An Econometric Analysis at the Entrepreneur Level

Abstract

We evaluate the impact of bank loans and start-up subsidies on the survival of the new firms. This work relies on the SINE94 survey that provides rich information on the entrepreneurs and their start-up projects. We use the propensity score matching methodology, in the case of multiple treatments, in order to evaluate the difference between the survival function the new firms have with their funding and the survival function they would have had with a different funding. We reach three conclusions. First, start-up subsidies increase significantly the survival of the firms created by former unemployed people, while they have no effect on the survival of the firms created by former employed people. Second, the allocation of subsidies acts like a screening process that improves on the performances of the bank loans. Third, the effect of subsidies is stronger than the effect of the bank loans because the former funding is attributed to a larger number of recipients.