EEPO Review: Start-up incentives, September Sweden

Transcription

1 EEPO Review: Start-up incentives, September 2014 Sweden Written by Dominique Anxo Centre for European Labour Market Studies HB (CELMS HB) September 2014

2 EUROPEAN COMMISSION Directorate DG Employment, Social Affairs and Inclusion Unit C.1 Europe 2020: Employment Policies: European Employment Strategy and Governance Contact: Monika Kalocinska European Commission B-1049 Brussels

3 EUROPEAN COMMISSION EEPO Review: Start-up incentives, September 2014 Sweden September, 2014 Directorate-General for Employment, Social Affairs and Inclusion European Employment Policy Observatory (EEPO)

4 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet ( Luxembourg: Publications Office of the European Union, 2014 ISBN ABC DOI European Union, 2014 Reproduction is authorised provided the source is acknowledged.

5 1 Introduction: start-up incentives as an active labour market measure From an international perspective the incidence of self-employment in Sweden is relatively low. According to the Swedish Labour Force Survey, the rate of self-employment was 9.6 % in At the same date, the share of self-employed men as a percentage of the total adult working population (among the year olds) was 13.2 %, the corresponding figure for women being 5.8 %. Like in many other modern economies, self-employment is therefore less common among women. Compared to wage earners Swedish selfemployed workers are older and have on average lower educational attainment and income. Self-employment is also higher in industries such as retail and business and personal services. Another stylised fact is that the majority of Swedish self-employed workers do not have any employees (71 % of self-employed were solo entrepreneurs in 2012) and the share of self-employed workers with employees has remained stable during the last two decades. The incidence of self-employment increased significantly during the severe recession in the early 1990s, indicating that the rate of self-employed workers in Sweden is counter-cyclical to the business cycle. Looking at the current economic downturn, it seems that, up to now, the share of self-employment in total employment has remained stable and that the decline in self-employment has been limited 1. Start-up incentive programmes in Sweden are not new. In order to promote entrepreneurship and self-employment, the Swedish labour market authorities launched already in 1984 a pilot scheme aiming at encouraging unemployed jobseekers to start their own business. The Swedish start-up grant programme was thereafter established as a permanent active labour market policy (ALMP) programmed in Up to the end of the 1990s around persons on a yearly basis were assigned to the programme (see Månsson & Delander, 2011). However, since the turn of the century, and in spite of some cyclical variations, the number of participants has continuously declined to reach less than beneficiaries on a yearly basis in Figure 1: Number of participants in start-up incentive schemes Source Public Employment Services database (Arbetsförmedlingen, 2014) 1 According to Statistics Sweden, between 2008 and 2009 the number of self-employed workers (aged years old) declined by around persons (-1.3 %), from to During the same period the number of dependent employees declined by more than persons (-1.0 %). 2 The programme, Starta eget bidrag (Start-up grants) changed its name to Stöd vid start av näringsverksamhet (support to start up a company) in the early 2000s. September

6 These figures have to be compared with the number of participants in other labour market programmes such as labour market training and the job guarantee for young people for example, where the number of participants amounted in 2013 to respectively and participants. At the same date, the number of jobseekers receiving a start-up grant represented around 1.2 % of the total number of participants in labour demand oriented ALMP programmes. 2 Start-up incentives today in Sweden The main objective of this section is to identify and describe existing ALMP measures aiming at stimulating self-employment and entrepreneurship and helping unemployed jobseekers to create their own company. Currently two types of start-up incentive programmes 3 are implemented in Sweden. A general start-up incentive programme, the so called support in starting a business (Stöd till start av näringsverksamhet) not targeted to specific groups, and a start-up incentive programme targeted to persons with a disability who without this type of public intervention would have difficulties to run a business, the so called special support in starting a business (särskilt stöd vid start av näringsverksamhet). 2.1 Start-up incentives targeted towards unemployed job seekers: Support in starting a business (Stöd till start av näringsverksamhet). The programme, support in starting a business (Stöd till start av näringsverksamhet) is targeted towards persons who are unemployed or at risk of becoming unemployed. To be eligible the jobseeker has to be registered at the public employment office 4. Furthermore, the jobseeker has to fulfil one of the following conditions: To be at least 25 years of age; To be at least 20 years old and fulfil the conditions for participating in the job guarantee for youth (Jobbgarantin för ungdomar); To be 18 years old and be distant from the labour market due to specific reasons; To be young and have a functional impairment affecting his/her job capacity; Participating in the job and development guarantee (programme) (Jobb och utvecklingsgarantin). For jobseekers covered by unemployment insurance, the daily activity support is equivalent to unemployment benefits, but no less than EUR 35 (SEK 320 per day). For those not entitled to unemployment benefits, the daily activity support amounts to EUR 25 (SEK 223). The activity support is given for a period of maximum six months and constitutes an additional taxable income during the start-up phase of the company. However, the grant can, under specific circumstances, such as for example illness, be extended. Regarding the conditionality, individuals who enter the programme should have some knowledge in starting and running a business. For those lacking this knowledge, participation in a training course in business administration provided by the PES is mandatory. Before entering the programme, the jobseekers have to present a business idea and a financing plan. This is reviewed by an external consultant and if approved the grant is accorded by the employment office. In other words, the activity support is only provided to jobseekers having good potential to run a business and if the business is expected to have a satisfactory level of profitability and good prospect for securing a sustainable employment. No restriction exists regarding the type of companies that could 3 It should be noted that there are other central government supports targeting entrepreneurs in Sweden. As a complement to the market, the state-owned company, Almi företagspartners AB offers risk bearing loan to SME enterprises. Following the template we restrict the analysis to startup incentives within the framework of ALMP. 4 The activity support can also be given to people that are not unemployed if they are residing in an assisted area (Stödzoner). September

7 be either a sole trader or a trading partnership, a limited company or an association. However, regarding the sectoral activities, due to EU regulation, some restrictions exist regarding agriculture and transport activities. Furthermore, the grants must not distort competition for other activities. Like other labour market policy measures, support in starting a business (Stöd till start av näringsverksamhet) is financed throughout the state budget. The cost of the start-up incentive is made of two parts: the participants' activity support (grant), which constitutes the main part, and the costs related to counselling, the additional costs related to training in business administration as well as the compensation to the consultants in charge of assessing the viability of the business idea and financing plan. In 2013, the total cost of the programme amounted to EUR 45.5 million (SEK 417 million) 5. At the same date the average monthly cost per participant was EUR (SEK ). The start-up activity support is monitored by the Public Employment Service (Arbetsförmedlingen, PES) and the result of the monitoring is published on a yearly basis by the PES. In 2013, 54 % of the beneficiaries were men, less than 5 % were younger than 25 years old, 26 % were foreign-born and around 11 % were disabled. According to the most recent monitoring report (Arbetsförmedlingen, 2014), 82 % of the participants in the programme were still employed six months after the end of the grant period. According to the PES, start-up grants are in this regard the most successful labour market policy scheme in Sweden. Regarding the interaction with other policy measures, as mentioned previously, participants in the job guarantee for young people and the job and development guarantee 6 are eligible to apply for the start-up grant. The Swedish government decided, in the aftermath of the 2008 economic crisis, to lower total employers' social security contribution for young people to %. The reduction of payroll tax covered everyone under the age of 26. The total reduction means in effect a halving of employers social contributions compared with full fees. The result is a substantial reduction of payroll tax paid by young solo entrepreneurs but also a reduction in the costs of employing a young person for startup companies 7. Regarding the interaction with policy measures providing income security to new entrepreneurs, it should be noted that since 2010 there have been several reforms to the social security system for the self-employed. These reforms covering unemployment insurance, sick pay and parental leave had the main objective to create clear and predictable rules and conditions for more equal treatment between self-employed and dependent employees. The changes in unemployment insurance were intended to provide more security for the self-employed, making the transition from employment to selfemployment safer. To illustrate, a person who has set up a business may still receive unemployment benefit for the first two years after the start of the business based on the income that he or she previously had as a dependent employee. Changes in sick pay have also provided more security for those opting for self-employment 8. The changes to the parental leave system are also intended to lead to more equality between the selfemployed and wage earners and favour the development of female entrepreneurship. In 5 At the same date, the total cost of ALMP programmes was EUR 3.9 billion (SEK 36 billion). 6 Targeted toward long-term unemployed the Job and Development guarantee/programme (JDP) was introduced in 2007 and is one of the most important programmes in terms of participants. The JDP consists of three phases. The first phase includes coaching and job search activities, the second phase consists of work practice and on-the-job training and rehabilitation, and the third phase is normally (subsidised) employment. 7 It should also be remembered that young people aged who have been unemployed for more than six months are also eligible for the so called New Start Job (Nystartjob). The reduced social contributions, together with the reduced labour cost associated with new start jobs for young people, mean that the wage cost of hiring a young person in a new start job is currently about 40 % lower. 8 One example is that all self-employed workers will be guaranteed sick leave of at least seven days. September

8 particular, the amount of compensation for loss of work while taking care of a sick child was increased for the self-employed. 2.2 Start-up incentives targeted towards disable persons: Special support in starting a business (särskilt stöd vid start av näringsverksamhet) This start-up incentive programme, special support in starting a business (särskilt stöd vid start av näringsverksamhet) is targeted toward jobseekers with a functional impairment that affects their working capacity. The financial support takes the form of an allowance of up to EUR (SEK ) aimed at buying special equipment and other devices making it possible for the disabled person to run his/her company. The eligibility conditions and conditionality are the same as for the above described activity support. The special activity support might also be combined with the above described start-up incentives. In cases of company closure/business failure or if the company is sold before three years, the allowance must be repaid to the authority. The special support programme in starting a business is also financed throughout the state budget. In 2013, 630 persons received this special allowance (56 % of women and 95 % of the recipients were older than 24 years old). At the same date, the total cost of the programme amounted to EUR 3.5 million (SEK 32 million). This measure is also monitored by the PES but to my best knowledge no formal evaluations have been performed to measure the efficiency of this scheme. 2.3 Swedish evaluation studies There are few Swedish scientific evaluations of the start-up programme. The first study was conducted by the Institute for Evaluation of Labour Market and Education Policy (IFAU) (see Carling and Gustafson, 1999) at the end of the 1990s. The authors examined the relative efficiency of start-up grants compared to usual wage subsidy programmes by analysing how long after the end of either programme people re-registered as unemployed. In other words, the authors examined the extent to which the two programmes were successful in providing long-term employment. Using longitudinal data, a duration model and controlling for a range of socio-economic variables the authors found that the risk of becoming unemployed was twice as high in the case of wage subsidies. Around 35 % of the subsidised self-employed and 60 % of the subsidised employees were unemployed again four years after the programmes ended. However, the authors found that this positive result was only valid for native Swedish workers. The idea that start-up grants support immigrant workers better than other programmes was therefore not confirmed in this study. It should be noted that the authors examined only the relative efficiency of the two programmes and not cost-efficiency. The authors found also some indications that participants in Self-employment grants may have better employment prospect due to unobserved characteristics than participants in other programmes, indicating some selection biases. In a more recent study, Andersson and Wadensjö (2007) found that male jobseekers who had received a start-up grant performed on average better regarding subsequent income level, number of employees and/or exit rate than unsubsidised jobseekers who set up their own business. The authors stressed, however, that these positive results might be ascribed to a selection effect, i.e. that the case worker selected the candidates most suited to selfemployment. In other words we cannot exclude that start-up grants benefit unemployed jobseekers with on average better socio-economic backgrounds, implying some form of creaming effect from the caseworkers at the PES. The third study was commissioned by the Swedish National Audit Office (Start-up grants: a successful programme 2008:24) and the evaluation was conducted by researchers from Linnaeus University (see Behrenz et al., 2012). The objective of the evaluation was twofold: firstly, to assess the extent to which the Swedish start-up programme was more effective than open unemployment or other ALMP measures in reducing unemployment spells and in providing long-lasting employment; secondly, to assess whether the start-up subsidy was flawed with deadweight losses and displacement effects. Using longitudinal register data for the period , September

9 controlling for potential selection bias by creating a control group using traditional propensity score technique, the authors found that the start-up subsidy had unequivocally positive employment effects compared to open unemployment and other programmes. Compared to the control groups, i.e. non-participants having the same observable characteristics as participants, the beneficiaries of the start-up grants were less likely to be registered as unemployed with the PES both two and four years after the end of their support period; they were more likely to obtain regular, non-subsidised jobs; the participants had been registered as job applicants with the PES for a shorter aggregate period of time and they were less likely to come back to the PES as unemployed or nonparticipants (see, Swedish National Audit Office, 2008) and Behrenz et al., 2012) 9. Using the same data and methodological approach Månsson & Delander (2011) analysed if there are gender differences in the outcomes of the start-up programmes. The results indicate that females entering the programme have a higher success rate than both female and male non-participants; however, the impact for female beneficiaries is less in comparison with their male counterparts. Compared to a matched sample of males in the start-up scheme, female participants are therefore less successful. Using also a propensity score approach and the same data set as Månson and Delander (2011), the Swedish National Audit Office (2012), performed a study comparing the outcome between natives and immigrants. The results of the econometric analysis suggest that while the start-up grant programme had positive employment effects for both natives and immigrants, the positive employment effects were greater for persons born in Sweden than those born abroad, confirming the results already found by Carling and Gustafson (see above). Both wage subsidy programmes and start-up grants may give rise to deadweight losses and displacement effects implying that the cost efficiency of these programmes is limited. Actually, it cannot be ruled out that a large number of jobseekers would have started a company without the financial support. Besides, the scheme could lead to some crowding out of unsubsidised new companies and the potential distortion of competition could be important. Swedish surveys from the early 2000s found a self-reported deadweight loss associated with start-up grants of around 40 % (see Falkenhall et al., 2003). Based on a survey of beneficiaries of the grant, the Swedish National Audit Office (2008) found also a self-reported deadweight loss of around 40 %, while Behrenz et al., (2012) estimated the deadweight loss to be around 20 %. Regarding displacement effects, the same authors show that while labour demand oriented labour market policy measures, such as hiring subsidies, have on average a statistically significant displacement effect (around 35 %) they did not find any statistically significant displacement effect for the start-up grant. According to the Swedish National Audit Office s survey (2008), about one in four beneficiaries considered that the start-up programme had given them advantages over their competitors, indicating some potential but relatively weak distortion of competition. All in all, the reviewed evaluation studies show that the self-reported deadweight loss as well as crowding out and displacement effects seem to be lower in the case of start-up grants compared to other ALMP measures, such as for example hiring subsidies. Country: Sweden Title of the measure: Support in Starting a Business (Stöd till start av näringsverksamhet) Main objective: To favour the development of entrepreneurship and selfemployment and ease the transitions from unemployment to a regular job by reducing unemployment spell and providing sustainable regular employment. Short description of the initiative Launched in 1984, the Swedish Start-up Grants programme became an integrated part of the Swedish ALMP in For 9 At the end of 2007 the share of matched beneficiaries of the start-up grants still in employment was 13 percentage points higher that the matched non-participants (control group) (see Behrenz et al., 2012). September

10 jobseekers covered by unemployment insurance the daily start-up support is equivalent to unemployment benefits. For those not entitled to unemployment benefits, the daily activity support amounts to EUR 25. The start-up support is temporary and given for a period of maximum six months. Target groups: Unemployed Jobseekers or persons at risk of becoming unemployed and registered at the PES. Targeted enterprises: No specific form of companies. Due to EU regulation some restrictions exist regarding agriculture activities and transport sector. Eligibility conditions: To be eligible for the activity support (grants) the jobseekers must be registered at the PES. In order to receive a grant the proposed business idea and financing plan must be approved by the PES. Usually an external consultant helps the caseworker at the PES to assess the expected profitability of the proposed business concept, its ability to provide long lasting employment, as well as an assessment of the ability of the applicant to run a business. According to competition regulations, the financial support should not distort competition or crowd out other firms. Budget/ Financing source(s): Finance throughout the state budget - in 2013, the total cost of the programme amounted to EUR 45.5 million (SEK 417 million). At the same date, the average monthly cost per participant was EUR (SEK ). Accompanying measures: For jobseekers lacking knowledge in starting and running a business, participation in a training course in business administration is mandatory before getting the grant. Summary of evaluation findings: Swedish evaluation studies of start-up subsidies are relatively scarce (three studies) but all these studies conclude that start-up grants are relatively more efficient in reducing unemployment spell and providing regular long lasting employment compared with other ALMP programmes, such as for example labour market training or standard hiring subsidies. According to Swedish evaluation studies conducted in the last decade, self-reported deadweight loss as well as crowding out and displacement effects seem to be lower in the case of start-up grants compared to other ALMP measures, such as for example hiring subsidies. Policy lessons: As above, monitoring and evaluation studies in Sweden show that well-targeted, designed and administrated business start-up subsidies are more efficient in reducing unemployment duration and providing long-term employment for jobseekers compared to other measures. Furthermore, this kind of support seems also to be more cost-efficient since they are associated with lower deadweight loss and displacement effect compared to other labour market programmes and therefore should be prioritised. References Behrenz, L., Delander, L. and Må nsson, J. Start-up subsidies in Sweden. Treatment Deadweight and Direct Displacement Effect, Working paper , Department of Economics and Statistics, Linnaeus University, Växjö, Internet: nd%20direct%20displacement%20effects%2c% pdf Carling K and L. Gustafson, Self-employment grants vs. subsidized employment: is there a difference in the re-employment risk? Working Paper 1999: 6. Uppsala: IFAU, Internet: Swedish National Audit Office, Stöd till start av näringsverksamhet, ett framgångrikt programme (Start-up grants: a successful programme), September

11 3 Conclusion Stockholm Internet: Launched in 1984, the Swedish Start-up Grants programme became an integrated part of the Swedish ALMP in The main objective of this scheme is to help unemployed jobseekers or persons at risk of unemployment to start up their own company. To be eligible for such a grant the person has to be registered at the PES. In order to receive a grant the proposed business idea and financing plan has to be approved by the PES. Usually an external consultant helps the caseworker at the PES to assess the expected profitability of the proposed business concept and financing plan, its capacity to provide long lasting employment, as well as an assessment of the ability of the applicant to run a business. Furthermore, the financial support should not distort competition or crowd out other firms. The financial support offered is equivalent to unemployment benefit and the grant is usually provided for six months. In 2013, less than individuals received a start-up grant, corresponding to less than 1.5 % of all participants in demand oriented labour market programmes. The number of participants has decreased notably since the end of the 1990s, where almost persons received a start-up grant. Monitoring and evaluation studies in Sweden confirm that business start-up subsidies are relatively more efficient compared to other labour market policy measures in reducing unemployment spell and providing long-term employment for jobseekers. In spite of its efficiency, the number of participants in the programme has decreased significantly during recent years. Against this background, start-up programmes should be given higher priority among the various labour market programmes, provided that care continues to be taken regarding the assignment process. Swedish evaluation studies suggest also that the positive impact of start-up grants for women and immigrants appears to be relatively low compared to their male and native counterparts. The PES should enhance its knowledge of why the efficiency of the programme is lower for women and the foreignborn. More globally the monitoring process should be improved, including the use of a longer follow-up period making it possible to assess more accurately how viable the businesses are and what employment opportunities they offer. What lessons might be drawn from the Swedish experience: well-targeted, administrated and designed start-up subsidies appears not only more efficient in terms of employment outcomes but even more cost-efficient with lower deadweight loss, crowding-out and displacement effects compared to other labour market programmes. Even though the monitoring process and assignment process could be improved, the results of evaluation suggest that start-up grants should be favoured. The Swedish experience shows also the need to have institutions in charge of monitoring and conducting scientific evaluations of ALMPs to obtain better knowledge of the effects of various labour market programmes and consequently improve labour market performance. 4 Bibliography Arbetsförmedlingen, 2013 Annual report (2013 årsredovisning), Internet: dlingens_årsredovisning_2014.pdf Behrenz, L., Delander, L. and Må nsson, J., Start-up subsidies in Sweden: Treatment, Deadweight and Direct Displacement Effect. Working paper , Department of Economics and Statistics, Linnaeus University, Växjö, Carling, K. and L. Gustafson, Self-employment grants vs. subsidized employment: is there a difference in the re-employment risk? Working Paper 1999: 6. Uppsala: IFAU Institute for Labor Market Policy Evaluation, Carling, K. and K. Richardson, The relative efficiency of labor market programs: Swedish experience from the 1990s, Labor Economics, 11(3), , September

12 Falkenhall, B., M. Johansson and J. Olofsson, Utvärdering av de näringspolitiska effekterna av stöd till start av näringsverksamhet. (Evaluation of start-up subsidies as a strategy for enterprise promotion) Östersund: ITPS Institutet för tillväxtpolitiska studier, Forslund A. and J. Vikström, Arbetsmarknadspolitikens effekter på sysselsättning och arbetslöshet en översikt (Effects of Labour Market Policy on Employment and Unemployment an Overview), Report 2011:7, Institute for Evaluation of Labour Market and Education Policy (IFAU), Forslund, A., P. Johansson and L. Lindqvist, Employment subsidies A fast lane from unemployment to work?, IFAU Working Paper 2004:18, Institute for Evaluation of Labour Market and Education Policy (IFAU), Månsson J. and Delander L., Gender differences in active labour market policy: The Swedish self-employment programme, Equality, Diversity and Inclusion: An International Journal, Vol. 30 Iss. 4 pp , Swedish National Audit Office, Stöd till start av näringsverksamhet, ett framgångrikt program (Start-up grants: a successful programme), Stockholm, Internet: Swedish National Audit Office, Etablering genom företagande är statens stöd till företagare effektiva för utrikes födda? (Establishment through enterprise are central government programmes for entrepreneurs effective for those born abroad?), RiR 2012:26. Internet: 20företagande.pdf September

13 Annex 1: Measure Description Table Measure Title Type of measure: e.g. startup incentive, UB conversion Target Group Number of benefici aries Amount of subsidy/ duration of subsidy Permanent or Temporary measure and dates of implement ation Conditionality imposed on beneficiary individuals or firms Funding source and total budget Measures complem enting the initiative Monitoring arrangeme nts Evaluation results available (here, please provide detail on the method used, on the coverage, and on the evaluation findings) If no evaluation is available, what is the expert s assessment of the impact of the measure? 1. Support in Starting a Business (Stöd till start av näringsv erksamh et) Start-up incentive Unemplo yed job seekers or at risk of becoming unemplo yed participa nts in 2013 For jobseekers covered by unemploy ment insurance the daily activity support is equivalent to unemploy ment benefits, but no less than SEK 320 per day (EUR 35). For those not entitled to unemploy ment benefits, the activity support daily Launched in 1984, the Swedish Start-up Grants programme became an integrated and permanent part of the Swedish ALMP in Ordinance (1996:1100 ) on activity support To be eligible the jobseeker has to be registered at the public employment office 10. Furthermore, the jobseeker has to fulfil one of the following conditions To be at least 25 years of age To be at least 20 years old and fulfil the conditions for participating in the youth Job programme (Jobgarantin för ungdommar) To be 18 years old and be distant from the PES via State Budget. In 2013, the total cost of the program me amounte d to SEK 417 million (EUR 45.5 million). At the same date the average monthly cost per participa nt was SEK 11 Work and developme nt guarantee, Youth guarantee. Training courses for applicants lacking knowledge in business administrat ion. Annual follow up from the Swedish PES Swedish studies of the employment impact of start-up incentives are relatively scarce. Using longitudinal data and various econometric techniques such as duration model and propensity score techniques for controlling for selection biases, all conclude that startup incentive schemes are more efficient in reducing unemployment spell and providing regular employment compared with other ALMP programmes such as labour market September

14 amounts to SEK 223 (EUR 25). The activity support is temporary and given for a period of maximum six months and constitute s an additional taxable income during the start-up phase of the company labour market due to specific reasons To be young and have a functional impairment affecting his/her job capacity Participating in the job and development programme (Jobb och utvecklingsgara ntin). In order to receive a grant, the proposed business idea and financing plan has to be approved by the PES. Usually an external consultant helps the caseworker at the PES to assess the expected profitability of the proposed business concept, its ability to provide long lasting employment, as well as an assessment of the ability of the applicant to run a business.. Furthermore, the 600 (EUR 1 270). training or standard hiring subsidies. A potential problem with programmes similar to ordinary jobs, like hiring and start-up subsidies, is that there is evidence that these schemes also tend to be the programmes most associated with h i g h d e a d w e i g h t l o s s a n d crowding- out ordinary jobs (displacement effect). Swedish surveys from the early 2000s found a selfreported deadweight loss for start-up incentive schemes ranging between 20 % and 40 %. Recent evaluation studies suggest that traditional ALMP programmes, such as hiring subsidies, have on average a statistically significant displacement effect (around 35 %) while start-up grants have no statistically significant September

15 financial support should not distort competition or crowd out other companies. displacement effect. All in all, the reviewed evaluation studies show that the selfreported deadweight loss as well as crowdingout and displacement effects seem to be lower in the case of start-up grants compared to other ALMP measures, such as for example hiring subsidies. 2. Special Support in Starting a Business ( Särskilt stöd till start av näringsv erksamh et) Start-up incentive Jobseeke rs with reduced work capacity due to a functiona l impairme nt Around 630 persons received this special allowanc e in 2013 The financial support takes the form of an allowance (Max SEK or EUR 6 560) aimed at buying special equipment and tools making it possible for the disable person to run his/her company Launched in 2000 the Special Support in Starting a Business is a permanent feature of the Swedish ALMP (Ordinance SFS 2000:630) In order to receive the allowance, the business concept and financing plan has to be approved by the PES. Usually an external consultant helps the caseworker at the PES to assess the expected profitability of the proposed business concept, its ability to provide long lasting employment, as well as an assessment of the ability of the applicant to run a business. PES via State Budget In 2013 The total cost of the program me amounte d to SEK 32 million (EUR 3.5 million). This measure might be compleme nted by the Support in Starting a Business (Stöd till start av näringsver ksamhet), conditional to the same eligibility and conditionali ty criteria. Annual follow up from the Swedish PES No formal evaluation of the efficiency of this scheme on employment probability or potential deadweight, replacement and/or substitution effects has been performed. In my view, the fact that this allowance is explicitly targeted to people with reduced work capacity due to functional impairment reduces the potential deadweight loss or crowding out effect. It should also be stressed that without this kind of support many individuals with reduced working capacities would have difficulties in running their business and/or be out of the labour force. In September

16 other words, there are strong reasons to believe that this type of support contributes to the integration of these marginal groups into the labour market and favour the development of entrepreneurship among disable persons. In any case a better monitoring and evaluation of the scheme should be undertaken by the PES. September

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