Conclusions

To improve future evaluation of start-up incentives for unemployed per- sons, this paper provides an analytical framework for the institutional

settings. Based on a broad literature review, it is shown that the state of research in its current form of ex-post evaluation studies is not in the position to provide the needed adequate evidence-based policy ad- vice that is demanded by politicians. In order to meet this demand, this paper initiates discussions and identifies research questions that need to be clarified in order to approach the target of a more effective policy design. This is necessary as the existing evaluation results are not unambiguous.

The conclusive considerations are as follows: Firstly, evaluation stud- ies of start-up incentives for unemployed persons have so far focused on supposedly “positive” outcomes such as survival rate, employability, job creation, change in self-employment rates, business growth, income changes and access to social security. Important negative effects such as displacement effects and dead-weight losses have so far been insuffi- ciently investigated. Although these are much more difficult to record, they are inherent in a comprehensive assessment of the measures. Up to now, the literature has been largely limited to either pointing out their general existence and the associated negative consequences, or, in the case of dead-weight losses, a measurement through surveys of the beneficiaries. Comprehensive studies at the micro level, taking into ac- count individual decision making of the unemployed persons (including existing job offers and other ALMPs) as well as local, sector-specific labor markets are not yet available but might provide the necessary insights.

Secondly, an appropriate evaluation of start-up incentives for unem- ployed persons should consider to a larger extent the political per- spective and economic circumstances. The present literature does not sufficiently distinguish between what the original policy objective of the measure is, that is, why it was introduced, and how the measure

performed in respect of this stated objective. It is argued, that this is partly due to a lack of clear formulation of the objectives by political decision-makers. Not only is this a prerequisite for adequate state- ments on external validity of these studies, but also this is of particular interest as this paper discusses conflicts between the two policy areas of ALMP and entrepreneurship policies. The former, ALMP, are ori- ented towards the labor market prospects of an individual unemployed person and the latter, entrepreneurship policies, towards the growth and survival of businesses, which is a point that is often ignored in the previous literature. In this respect, there is also a lack of basic explanatory models for the fact that there are not only considerable differences between countries in their financial commitment and their number of participants in these kind of policies, but also that there are considerable fluctuations of this measures within different coun- tries. That is, times of intensive demand for these start-up incentives are often followed by periods with considerable declines in the num- ber of participants. Whether this is politically initiated, for example, by the reduction of financial resources, whether the unemployed lose confidence in the measure due to negative feedback by supported indi- viduals and, as a result, the general demand for the start-up incentives decreases or whether there are overarching interdependencies with the unemployment rate, has not yet been clarified.

Thirdly, the use of start-up incentives for unemployed persons requires verifiable economic justification by identifying market failures. In par- ticular, the topic of credit constraints and capital market imperfection requires further academic attention. Although research has already been able to show that other groups such as women and migrants have been discriminated against by banks, no such study is yet available for unemployed persons with a desire to start-up a business. If this discrim- ination exists at all, and there are reasons to believe that they don’t as

unemployment is in fact associated with a higher risk of failure, then it should be followed by a discussion on the appropriate type of funding. So far, mainly grants have been provided to unemployed persons by the governments, even though that the assumed market failure is that the unemployed persons do not receive the credits demanded by pri- vate banks. The granting of (micro)-loans by public banks, subsidized interest rates or guarantees and warranties by the state are obvious alternatives and have so far been neglected in research, although there is a great deal of political interest in the subject.

Fourthly, due to the lack of clarification of these fundamental issues, it is not yet possible to identify best practices with regard to the insti- tutional framework. We are a long way from an evidence-based policy making that aims to make the instrument of start-up incentives for unemployed persons as effective as possible. This is because individual funding conditions such as the type and amount of financial support, the broad or restrictive definition of target groups (and the selection process as such), the necessity of a screening process through the intro- duction of business plans, etc. are not linked through empirical studies to the investigated outcomes of the measures. This paper is a first step in this respect, in that it introduces a uniform institutional framework to compare the funding instruments studied in the literature so far. Not only is it shown how different the individual funding instruments are within and between countries (high / low restrictive eligibility criteria, high / low level of financial support), but also the possible repercussions on outcomes are discussed. Nevertheless, it remains on a descriptive and theoretical level. The empirical examination of this consideration is the responsibility of further studies.

To address these open research issues, cooperation between research and politics in particular must be strengthened as more comprehensive

studies by scholars largely depend on the availability of data from the implemented measures. A promising source of longitudinal data for fur- ther studies on the policy level may be the result and outcome indicator system introduced for the funding period 2014-2020 by the European Commission (European Union, 2013a, for an overview see McCann and Ortega-Argilés, 2016). As all member states are equally obliged to col- lect these data for their co-financed measures of the EU cohesion policy, there is a considerable degree of heterogeneity in terms of policy de- signs and economic circumstances. Here, a contribution could be made at the macro level to the considerations made between policy mak- ing process, policy design and performance of the measures, whereby economic conditions at the regional level such as unemployment rate and GDP per capita could be taken into account. Additionally, as more studies with information on the micro level are needed to ana- lyze specifically the problems of displacement and dead-weight effects, it is likely that especially the Nordic Countries can contribute to the literature with their comprehensive individual information on income, employment history and firm development in a valuable way (Fritsch and Storey, 2014).

Chapter 5

Unemployment Reduction through Self-Employ-

ment – A Gender Question?

“SHUI TA: Have they gone? All of them? I cannot hold out any longer. Illustrious Ones, I have recognised you!

THE SECOND GOD: What have you done with our good person of Szechwan? SHUI TA: Let me confess the frightful truth. I am your good person!

He takes off his mask and rips away his costume. Shen Teh stands there.

THE SECOND GOD: Shen Teh!

SHEN TEH: Yes, it is me. Shui Ta and Shen Teh, I am both of them. Your original order

To be good while yet surviving Split me like lightning into two people.”

— Brecht (2016, p. 181)

Abstract.64 _{Using macro-level panel data of 23 OECD countries dur-}

ing the period 1991–2015, we empirically analyze whether an increase in self-employment leads to a reduction of unemployment and whether

the effect depends on the gender of the self-employed. Estimating

population-weighted vector autoregressive models, we find that self- employment exerts positive employment creation effects. Moreover, male self-employment affects employment growth somewhat faster than does female self-employment. However, we also find that unemploy- ment pushes males into self-employment in the short-run while, in the medium-run, we confirm a pull effect independent of the gender of the

self-employed.65

64 _{This chapter is based on joint work with Tina Haussen.} 65

JEL-Classification: J23; J64; L26; L53; M13; O11; J16. Keywords: Unemploy- ment; Self-employment; Gender; VAR; Entrepreneurship.