From Unemployment to Self-Employment–Public Promotion and Selectivity

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:To fight unemployment in Gennany, since 1994 public promotion of start-ups by the unemployed (called “bridging allowances”) were accelerated. Empirical analyses based on individual data show that unemployed entrepreneurs are not a random sample of the group of persons who leave unemployment. Simultaneous econometric models based on finn data for the period from 1994 to 1997 indicate that bridging allowances had no positive impact on finn survival and employment growth in the group of promoted finns. Selectivity, heterogeneity, and general equilibrium effects of bridging allowances are among the reasons for the empirical findings.