EIZ Working Papers, No. 1, 2020.
Other
“Fine... I’ll do it myself”: Lessons from self-employment grants in a long recession period
Ivan Zilic
orcid.org/0000-0002-1660-2124
; The Institute of Economics, Zagreb
Stjepan Srhoj
orcid.org/0000-0002-7105-8088
; University of Dubrovnik
Abstract
This paper evaluates the effect of a self-employment grant scheme for unemployed individuals—designed to ease the first 12 months of business operation—on firm growth, survival, and labor market re-integration in Croatia in the 2010–2017 period. Grants offered a moderate amount of finances (up to 50% of average annual gross salary) and absorbed only 5% of funds allocated to active labor market policies, but accounted for 10% of new firms opened throughout the years. We use the universe of unemployment episodes and the universe of unlimited and limited liability firms to document the effect of self-employment grants both causally and descriptively. Exploiting longitudinal structure of unemployment episodes dataset, we find that individuals who finish their spell with a grant have a significantly lower probability of returning to unemployment. Also, we find that limited liability firms opened via a grant have lower growth potential and worse survival profile, while unlimited liability firms—even though a sizable portion of them closes after a required 12-month grant period—have a more favorable survival profile. While these results are in line with the rest of the empirical literature on the self-employment grants, we also find that the effectiveness of these grants has increased throughout the years, indicating towards the direction of institutional learning.
Keywords
self-employment grant; evaluation; unemployment; firm performance.
Hrčak ID:
232616
URI
Publication date:
23.1.2020.
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