Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

Abstract

We evaluate the effect of downside insurance on self-employment. We exploit a largescale reform of French unemployment benefits that insured unemployed workers starting businesses. The reform significantly increased firm creation without decreasing the quality of new entrants. Firms started postreform were initially smaller, but their employment growth, productivity, and survival rates are similar to those prereform. New entrepreneurs' characteristics and expectations are also similar. Finally, jobs created by new entrants crowd out employment in incumbent firms almost onefor-one, but have a higher productivity than incumbents. These results highlight the benefits of encouraging experimentation by lowering barriers to entry.The problem with the French is that they have no word for entrepreneur.Attributed to George W. Bush.OVER THE LAST TWO DECADES, policymakers and academics alike have embraced the idea that reducing barriers to self-employment and entrepreneurship is important for promoting job creation. 1 The primary focus of empirical research has been on understanding how such barriers affect the level of entrepreneurial activity (i.e., the number of new firms created). Many recent studies find evidence of significant heterogeneity among potential entrepreneurs'

Firm and Worker Dynamics in an Aging Labor Market

“…Second, it is consistent with the evidence cited above that displacement significantly increases the probability of entry to entrepreneurship without notably affecting the success of new start-ups. Relatedly, recent work by Hombert et al (2017) finds that providing incentives to unemployed workers who start businesses substantially increases entry without worsening the quality of new entrants. In both cases, if instead ideas had been "inspection goods," one would have expected such marginal firms to be worse.…”

From hibernation to reallocation: Loan guarantees and their implications for post-COVID-19 productivity

“…(un)employment-to-entrepreneurship transitions could be facilitated by enhancing lifelong learning and the portability of social protection. Evidence from a reform in this direction implemented in France in 2002 suggests that there has been an effect on firms' creation and that a significant fraction of these new firms grew larger after two years (Hombert, 2020).…”

Partisan Entrepreneurship

“…3 For financial constraints see, for example, Bertrand et al (2007), Kerr and Nanda (2009), Chatterji and Seamans (2012), Robb and Robinson (2014), Kerr et al (2015), Adelino et al (2015), Schmalz et al (2017). For policies reducing risk see Hombert et al (2020), Gottlieb et al (2021). For training, peers and access to reproductive healthcare see Valdivia (2011), Drexler et al (2014), Fairlie et al (2015), Lerner and Malmendier (2013), Sørensen (2010), andZandberg (2021).…”