Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France |
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| Authors: | JOHAN HOMBERT ANTOINETTE SCHOAR DAVID SRAER DAVID THESMAR |
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| Institution: | 1. Johan Hombert is with HEC Paris. Antoinette Schoar is with MIT-Sloan, NBER, and CEPR. David Sraer is with UC Berkeley, NBER, and CEPR. David Thesmar is with MIT-Sloan and CEPR. This article is the substantially revised version of a paper previously circulated under the title “Should the Government Make it Safer to Start a Business? Evidence From a French Reform.” We thank participants at many conferences and seminars for comments and suggestions. In particular, we are indebted to Ashwini Agrawal, Steve Davis, Guy Laroque, David Matsa, Toby Moskowitz, Marina Niessner, Elena Simintzi, and Amit Seru for their valuable insights. The data used in this paper are confidential but not the authors' exclusive access. We have read The Journal of Finance disclosure policy and have no conflicts of interest to 2. disclose. |
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| Abstract: | We evaluate the effect of downside insurance on self-employment. We exploit a large-scale 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 one-for-one, but have a higher productivity than incumbents. These results highlight the benefits of encouraging experimentation by lowering barriers to entry. |
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