Regional Effect Heterogeneity of Start-up Subsidies for the Unemployed

Evaluation studies have shown the high effectiveness of start-up subsidies for unemployed individuals to improve labour market outcomes of participants. What has not been examined yet are the potentially heterogeneous effects of start-up programmes across regional labour markets. Labour demand-side restrictions in deprived areas generally increase entries into start-up programmes as job offers are limited. However, the survival of firms in these areas is also lower, such that the overall effect remains unclear. Based on German data, it is found that the founding process, development of businesses and programme effectiveness are influenced by prevailing economic conditions at start-up.