Start Me Up: The Effectiveness of a Self-employment Programme for Needy Unemployed People in Germany

We studied the effect of participation in a new business start-up scheme for needy unemployed people in Germany. The programme was introduced at the beginning of the year 2005 together with a new means-tested benefit system. The aim of the programme was to promote entrepreneurial activities among unemployed people. On the level of society such a programme aims at reducing unemployment, promoting entrepreneurship and potentially creating new work places. On the individual level, the programme may help needy unemployed to obtain gainful employment and to become independent of welfare benefits. We used a sample of participants and of an adequate control group and concentrate on studying the effect of the programme on the individual level. We found positive and sustained effects of the programme. Even by the time when nearly no participant receives the start-up subsidy, the treatment reduces considerably the proportion of registered unemployed and benefit recipients among programme participants.