PT  - JOURNAL ARTICLE
AU  - Garcia, Sebastian Camarero
AU  - Hansch, Michelle
TI  - The Effect of Unemployment Insurance Benefits on (Self-)Employment: Two Sides of the Same Coin?
AID  - 10.3368/jhr.0422-12261R3
DP  - 2024 Jul 12
TA  - Journal of Human Resources
PG  - 0422-12261R3
4099  - http://jhr.uwpress.org/content/early/2024/07/09/jhr.0422-12261R3.short
4100  - http://jhr.uwpress.org/content/early/2024/07/09/jhr.0422-12261R3.full
AB  - Although active labor market policies often subsidize unemployed individuals to start their own businesses, little is known about the role of unemployment insurance (UI) generosity for self-employment. Exploiting the 2012 labor market reform in Spain which increased a discontinuity in the UI benefit schedule, we estimate the causal effect of lower UI generosity on the extensive margin of (self-)employment. We find heterogeneous effects: while the job-finding rate increases, the startup rate decreases. The reform’s unintended negative effect on self-employment (35-50%) outweighs the positive effect on re-employment (5-30%). The combined employment effect is smaller than analyses focusing only on re-employment suggest.