Does Unemployment Insurance Change the Selection into Entrepreneurship?

Johan Hombert, Antoinette Schoar, David Sraer, David Thesmar

Chapter in NBER book Measuring Entrepreneurial Businesses: Current Knowledge and Challenges (2017), John Haltiwanger, Erik Hurst, Javier Miranda, and Antoinette Schoar, editors (p. 351 - 369)
Conference held December 16-17, 2014
Published in September 2017 by University of Chicago Press
© 2017 by the National Bureau of Economic Research
in NBER Book Series Studies in Income and Wealth

The French Reform of 2003, documented in Hombert et al. (2014), led to 25% increase in supply of newly created fi rms. The question we investigate in this article is whether it led to a signifi cant reduction in the potential for long-term success of new ventures. We proceed in two steps. First, using the 1994 cohort, we show that some entrepreneurial and project characteristics, that we can measure using a large-scale survey, signi ficantly predict the probability that newly founded firms succeed in the long-run. We show that fi rms started by entrepreneurs that plans on growing, have already had entrepreneurial experience, or are motivated by new ideas, are signifi cantly more likely to employ at least 50 persons after 12 years. We then use this relationship to see if the success potential of start-ups was signifi cantly deteriorated by the 2003 reform. We find that it was not.

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