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Many countries are turning to active labor market programs (ALMPs) to increase incentives for individuals to start a business and to reduce unemployment, but research on the effectiveness of such programs has produced mixed results and is still inconclusive at the macroeconomic level. This article examines the importance of ALMPs targeting entrepreneurship to explain differences in aggregate entrepreneurship rates across different countries. By using GEM data from OECD countries over the period 2002-2013, our results show the positive impact of ALMPs on the rate of necessity entrepreneurship but no significant effect on the rate of opportunity entrepreneurship. We have further established that generous unemployment benefits reduce the positive outcome of ALMPs on the aggregate rate of necessity entrepreneurship. Moreover, because most businesses started out of necessity do not create new jobs, we find that the economic spin-off of such programs in terms of unemployment reduction is very limited.

 

Laffineur C., Dubard Barbosa S., Fayolle A., Nziali E. (2017). Active labor market programs’ effects on entrepreneurship and unemployment. Small Business Economics, Forthcoming. DOI: 10.1007/s11187-017-9857-7.

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