Unemployment, Entrepreneurship and Firm Outcomes

Review of Economic Dynamics, 2022, vol. 45, 322-338

Abstract: Do differences exist between firms created by unemployed individuals relative to those created by otherwise identical employed individuals? I develop a general equilibrium model of entrepreneurship with endogenous entry and exit that allows for different choices of business projects by unemployed and employed individuals. The model predicts that (1) different outside options imply that the unemployed are more likely to start firms, but these are smaller and they fail more often and (2) employed individuals are more responsive to wages than the unemployed in their decision to start a firm. I verify these implications using a new administrative Canadian matched owner-employer-employee dataset. I use firm closures to identify random assignments of individuals to unemployment. Finally, using a quantitative version of the model, I show that subsidizing entrepreneurship among the unemployed has little impact on job creation and induces a reallocation of resources to low productivity firms. (Copyright: Elsevier)

Keywords: Firm dynamics; Unemployment; Entrepreneurship; Labor markets (search for similar items in EconPapers)
JEL-codes: E23 E24 J63 J64 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2021.07.003
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code files for "Unemployment, Entrepreneurship and Firm Outcomes" (2021)
Working Paper: Online Appendix to "Unemployment, Entrepreneurship and Firm Outcomes" (2021)
Working Paper: Unemployment, entrepreneurship and firm outcomes (2019)
Working Paper: Unemployment, Entrepreneurship and Firm Outcomes (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:21-63

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2021.07.003

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().