Modern welfare states spend substantial amounts on labor market policies and education programs aimed at promoting employment and wages. For successful policy development, monitoring of program outcomes is essential. In an era of limited funds, this program area meets the demands by decision makers and taxpayers for clean empirical evidence on the effectiveness of labor market-related policies. Which participants in a program actually benefit from it? And how does the initiative affect those who do not participate? How stable are the effects of the policy in the longer run? Econometric evaluation gives answers to these types of questions. IZA experts apply a broad range of econometric evaluation approaches – from designs which are suitable for situations without controlled policy experiments up to designs which implement randomized field experiments. Simulation approaches based on empirical regularities in individual behavior enable evaluation even before implementation of new programs. Using these techniques to carry out rigorous cost-benefit analyses, IZA provides independent advice to policymakers – pursuing the objective to improve the effectiveness of policy instruments and to contribute to a more targeted allocation of financial resources.
During the first five years after start-up, entrepreneurs in Germany can receive public funding for external business coaching (“Gründercoaching Deutschland”). The program was introduced in October 1, 2007 and one year later extended by a variant especially designed for start-ups out of unemployment (“Gründercoaching Deutschland – Gründungen aus Arbeitslosigkeit”). For the latter program the coverage rate of the coaching costs is higher and the period of eligibility is restricted to one year after start-up. Both programs aim to increase the sustainability of business start-ups and have become an important part of entrepreneurial support programs in Germany. Together with Prof. Dr. Kritikos (DIW Berlin) and the Institute for Applied Social Science (infas), IZA and the University of Potsdam evaluate the effectiveness and efficiency of both instruments. Based on the evaluation results, the project team will also give policy advice with respect to the prospective organization of the programs' set up. After first results have been submitted to the Ministry in June 2011, the final report including long-run results will be due in June 2013.
Last updated: 2012/09/10
Evaluation of the New Start-up Subsidy
Institute for Employment Research (IAB), Nuremberg
In 2006 the German government introduced the “new start-up subsidy” (“Gründungszuschuss”) to support unemployed individuals to become self-employed. The implementation of this program replaced two earlier programs, i.e., the bridging allowance (“Überbrückungsgeld”) and the start-up subsidy (“Existenzgründungszuschuss”). Evaluations of the latter two programs within the Hartz-Evaluation and the IZA research project “Long-Run Effects of Start-Up Subsidies” (see below) showed that they were quite successful. The current project evaluates the new start-up subsidy and is therefore a consistent extension of the research on start-up subsidies in Germany. We adopt a holistic evaluation approach, comparing the labor market outcomes of subsidized business founders and a control group of other unemployed individuals on the one hand, and the performance of subsidized businesses to unsubsidized start-ups on the other. Furthermore, we survey supported entrepreneurs right after they are starting their business, allowing an assessment of the dynamic process during the founding period. Long-run results are expected to be available in 2013.
"Alte Idee, neues Programm: Der Gründungszuschuss als Nachfolger von Überbrückungsgeld und Ich-AG", IZA DP No. 6035, October 2011, (published in: Zeitschrift für ArbeitsmarktForschung / Journal for Labour Market Research, 2012, 45 (2), 99-123) [view abstract]
Analyzing the determinants of differential transition patterns from unemployment to employment for individuals with perceivably similar labor market characteristics is an important subject of labor market research. This research project aims to fill the gap in the literature on this topic, making use of a novel dataset, the IZA Evaluation Dataset. This dataset consists of a representative inflow sample into unemployment, and contains detailed information on usually unknown individual characteristics as well as job search choices of the unemployed. This allows us to analyze the determinants of reservation wages and the type and intensity of job search as well as their impact on unemployment duration. In particular, we investigate the role of individual characteristics (as personality traits, social networks) in the job search process, as well as the impact of active labor market policies. Our results so far indicate that differences in the potential duration of unemployment benefit receipt as well as differences in personality traits and in subjective expectations about participation probabilities in active labor market policy programs lead to heterogeneity in the search behavior and in the transition probabilities into employment.
"The Effect of Active Labor Market Programs on Not-Yet Treated Unemployed Individuals", IZA DP No. 3825, November 2008, (published in: Journal of the European Economic Association, 2009, 7(2-3), 606-616) [view abstract]
"Benefit Duration, Unemployment Duration and Job Match Quality: A Regression-Discontinuity Approach", IZA DP No. 4670, December 2009, (published in: Journal of Applied Econometrics, 2013, 28 (4), 604-627) [view abstract]
"Determinanten des Suchverhaltens von Arbeitslosen: Ausgewählte Erkenntnisse basierend auf dem IZA Evaluationsdatensatz", IZA DP No. 5379, December 2010, (published in: Zeitschrift für ArbeitsmarktForschung / Journal for Labour Market Research, 2011, 44 (1-2), 119-125) [view abstract]
Last updated: 2011/05/27
Long-Run Effects of Start-Up Subsidies
Institute for Employment Research (IAB), Nuremberg
During the 2006 evaluations of the “Hartz reforms”, the effects of two kinds of grants for business foundation (start-up subsidy and bridging allowance) were examined over a three-year-period after business start-up. In this project we analyze the long-term effects of both instruments, in order to recommend policy-relevant strategies for the further reform of active labor market policy in Germany. Persons were interviewed five years after entering the programs in order to find out whether they are still successful in the market. Five years after start-up, the results show that a significant share of former unemployed individuals who participated in the programs are still self-employed; compared to a control group of other unemployed individuals both programs successfully integrated participants into the labor market.
"Die Nachhaltigkeit von geförderten Existenzgründungen aus Arbeitslosigkeit: Eine Bilanz nach fünf Jahren", IZA DP No. 3880, December 2008, (published in: Zeitschrift für ArbeitsmarktForschung / Journal for Labour Market Research, 2010, 42(4), 269-291) [view abstract]
"Start-Up Subsidies for the Unemployed: Long-Term Evidence and Effect Heterogeneity", IZA DP No. 4790, February 2010, (published in: Journal of Public Economics, 2011, 95 (3-4), 311–331) [view abstract]