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New Research Shows That Unemployment Insurance Can Spur Entrepreneurial Activity

How to foster business dynamism when we emerge from COVID-19? New research shows that well designed unemployment insurance is key. Professor of Finance Johan Hombert (HEC Paris), with three researchers from UC Berkeley and MIT Sloan School of Management, has recently published the research paper, “Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France", in The Journal of Finance.

professeurs de finance - HEC Paris

From left to right: Johan Hombert (HEC Paris), Antoinette Schoar (MIT Sloan School of Management), David Sraer (UC Berkeley) and David Thesmar (MIT Sloan School of Management)

HEC Paris Professor of Finance Johan Hombert has published a research paper in The Journal of Finance in June 2020. The Journal of Finance is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the American Finance Association. It is considered to be one of the premier finance journals.

This study co-authored by Antoinette Schoar (MIT Sloan School of Management), David Sraer (UC Berkeley) and David Thesmar (MIT Sloan School of Management) shows that well-designed unemployment insurance is key to foster business dynamism. Professor Hombert explains.

"In 'Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France', we study the impact of unemployment insurance on business creation in the context of a large-scale reform that took place in France in 2002, known as 'Plan d’Aide au Retour à l’Emploi (PARE)'. The reform aimed at fostering business creation by unemployed people. We found that businesses created through the reform start small but a significant fraction of them eventually grow and create jobs.

Our research thus highlights that it is important to keep this scheme alive, especially in a context of rising job destruction and rising uncertainty for entrepreneurs in the wake of the COVID-19 pandemic. Well-designed unemployment insurance is an efficient way to help unemployment people create jobs for themselves and for others, and to foster new business creation at the same time."

 

Learn more in this summary by Professor Hombert on Knowledge@HEC: How Unemployment Insurance Can Foster Business Dynamism, and on Johan Hombert’s publications on Twitter.