2020/01/23 by JOHAN HOMBERT, Johan Hombert, Antoinette Schoar +5 · 2 citations
Economics, Econometrics and Finance · Business, Management and Accounting · #Firm Innovation and Growth #Labor market dynamics and wage inequality #Entrepreneurship Studies and Influences
paper · doi:10.1111/jofi.12880
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.