Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Keywords: entrepreneurship, training, random experiment, evaluation, self-employment Terms of use: Documents in EconStor may Abstract:Theories of market failures and targeting motivate the promotion of entrepreneurship training programs and generate testable predictions regarding heterogeneous treatment effects from such programs. Using a large randomized evaluation in the United States, we find no strong or lasting effects on those most likely to face credit or human capital constraints, or labor market discrimination. We do find a short-run effect on business ownership for those unemployed at baseline, but this dissipates at longer horizons. Treatment effects on the full sample are also shortterm and limited in scope: we do not find effects on business sales, earnings, or employees. (2010)). 3 The only previous randomized trial conducted in the United States was a smaller demonstration experiment of self-employment training for U.I. recipients in Washington and Massachusetts (Benus et al. 1994). That study found positive program impacts on self-employment, total earnings, and job creation, but in addition to training the assistance program allowed for concurrent U.I. benefit payments and a lump-sum benefit payment. Several recent experiments of the effects of business training on microentrepreneurs have been conducted in developing countries (Berge, Bjorvatn, and Tungooden 2011; Drexler, Fischer, and Schoar 2011; Karlan and Valdivia 2011; Karlan, Knight, and Udry 2012; Field, Jayachandran, and Pande 2010). These studies have generally found some positive, but mixed, results. The results of this literature may be informative, but not generalizable, to the developed country context, in which the content of entrepreneurship training, education level of trainees, and types of businesses being created are very different, and where formal labor, financial and business markets are more open and accessible. For related research using non-randomized approaches to 2 tests of heterogeneous treatment effects that speak to the key arguments for subsidizing training.Project GATE was a longitudinal study conducted by the U.S. Department of Labor and the Small Business Administration (SBA) in which free entrepreneurship training was randomly offered to individuals interested in starting or improving a business. More than 4,000 individuals applied for a limited number of slots at 14 different SBDCs and non-profit community-based organizations (CBOs) located across s...

Entrepreneurship Education and Entry into Self-Employment Among University Graduates

“…However, the intervention did not increase the overall employment rate among beneficiaries. These results suggest a substitution from wage employment to selfemployment, similar to findings in Fairlie et al (2015) in the U.S. They are also consistent with findings that private sector reservation wages are higher among participants in the entrepreneurship track.…”

“…Even though the effect is not significant, the decrease in wage employment is of the same magnitude as the significant increase in self-employment. Similar to findings in Fairlie et al (2015) in the US, these results suggest that the program changed the composition of employment by inducing a partial substitution from wage employment to self-employment for participants in the entrepreneurship track.…”

“…De Mel, McKenzie, and Woodruff (2014) show that business training targeted to women in urban Sri Lanka affected business practices but not productivity among existing business owners, and that the same training accelerated entry into self-employment in the short-run. Fairlie, Karlan, and Zinman (2015) find limited overall treatment effects of entrepreneurship training in the United States, although they find short-term effects on business ownership among individuals previously unemployed. We complement this limited literature analyzing the effectiveness of entrepreneurship training in facilitating entry into self-employment.…”

Researching Entrepreneurship

“…This calls for more fi eld experiments or randomized trials , i.e., experimentally controlled, real-world initiatives. And this is precisely what is now under way, for example, through the randomization of participation in GATE and other policy initiatives (Fairlie, Karlan, & Zinman, 2015 ) and the Innovation Growth Lab ( www.innovationgrowthlab.org/innovation-growth-lab ). Interesting developments, indeed!…”

The Effects of Human Capital Interventions on Entrepreneurial Performance in Industrialized Countries

“…Fairlie et al . () use data from the same entrepreneurship program as Michaelides and Benus (). Iversen et al .…”