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Fine....I'll do it myself: lessons from self-employment grants in a long recession period

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  • Srhoj, Stjepan
  • Zilic, Ivan
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 reintegration 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 (ALMPs), but accounted for 10% of new firms opened throughout the years. We contribute to the literature on self-employment grants with several novel findings. Exploiting the longitudinal structure of the unemployment episodes dataset, we find that individuals who finish their spell with a grant have a significantly lower probability of returning to unemployment. The policy is particularly effective for individuals who would have otherwise had labor market opportunities (men, more educated, prime-age workers, previously employed), individuals who became unemployed after inactivity and lost their job due to a firm's closure-which demonstrates that self-employment subsidies can be effective in ameliorating unemployment. However, the policy was not effective for longer unemployed individuals. At the firm level, we find descriptive evidence 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. Finally, we also find that the effectiveness of these grants has increased throughout the years, indicating toward the direction of institutional learning.

Suggested Citation

  • Srhoj, Stjepan & Zilic, Ivan, 2021. "Fine....I'll do it myself: lessons from self-employment grants in a long recession period," LSE Research Online Documents on Economics 110998, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:110998
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    References listed on IDEAS

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    Cited by:

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    2. Stjepan Srhoj & Melko Dragojević, 2024. "Public Procurement and Supplier Job Creation: Insights from Auctions," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 40(2), pages 470-527.
    3. Mahmutaj Lura Rexhepi & Krasniqi Besnik, 2020. "Innovation Types and Sales Growth in Small Firms: Evidence from Kosovo," South East European Journal of Economics and Business, Sciendo, vol. 15(1), pages 27-43, June.
    4. Małgorzata Wosiek & Adam Czudec & Ryszard Kata, 2022. "Relationship between unemployment and new business registrations at the local level: the case of Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 34(8), pages 1083-1108, November.
    5. Srhoj, Stjepan & Kovač, Dejan & Shapiro, Jacob N. & Filer, Randall K., 2023. "The impact of delay: Evidence from formal out-of-court restructuring," Journal of Corporate Finance, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    evaluation; firm performance; self-employment grant; unemployment;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • N0 - Economic History - - General

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