Business start-ups by the unemployed - an econometric analysis based on firm data

Active labour market policies to promote firm foundation from unemployment were improved considerably in Germany in August 1994, a fact which led to a sharp increase in the number of start-ups by the unemployed. The study compares firm survival and employment growth of start-ups by unemployed and others, based on firm data from 15 regions in East and West Germany. Self-selection effects are taken into account by using simultaneous models of start-up promotion and firm development. While firm survival is negatively affected by foundation from unemployment in East Germany (-6%), an influence on employment growth is not evident. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: C35; D92, J68; M13.