Characteristics and Determinants of Start-ups from Unemployment: Evidence from German Micro Data

Abstract

The study empirically analyzes the chazacteristics and determinants ofstart-ups from unemployment in Germany. Individual unemployment is shown to be an important push-factor for the transition to self-employment. The selection of the higher-educated into self-employment is stronger among the unemployed than among the employed. The educational level of formerly unemployed founders is compazable to those of other founders. Start-ups from unemployment have fewer employees on average and are mostly one-man firms. A large proportion of them are in less capital-intensive sectors characterized by a high level of competition. The smaller propensity of previously unemployed founders to invest and to take on employees can be attributed to their restricted access to finance and information on opportunities. Subsidising stazt-ups from unemployment with loans instead of grants and helping the unemployed to improve their abilities in opportunity recognition should enhance the quality of start-ups from unemployment.