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Start-Up Grants to Unemployed Immigrants in Germany: A Means to Reach Employment Parity?

College of William and Mary
Publication Date
  • Labor Economics
  • Germany
  • Start-Up Grants
  • Immigrants
  • Bridging Allowance
  • Gsoep
  • Program Evaluation
  • Duration Modeling
  • Self-Employment
  • Überbrückungsgeld
  • Economics


Immigrants in Germany exhibit, on average, an increased frequency of unemployment, reduced earnings, and an increased uptake and dependence upon welfare and unemployment benefits relative to native Germans. Although Germany's strong welfare state has shown success in mobilizing the difficult-to-employ in general, it has scarcely focused or targeted its efforts on immigrants despite their prevalence as a large welfare constituency. The literature on mobilizing immigrants in Germany through the welfare state is small, and has thus far focused on short-term public employment programs and training but not self-employment. This paper proposes utilizing Germany's complement of start-up subsidy programs to take advantage of an often-noted proclivity for immigrants to succeed in self-employment. Using the German Socioeconomic Panel and various duration and panel models measuring employment stability and income, this analysis finds clear "catching-up" effects resulting from immigrant utilization of the Bridging Allowance in Germany from 1983-1993, relative to native Germans. Further evidence suggests that ignoring differential effects between immigrants and natives in analyzing start-up subsidies will disguise significant variation in the responsiveness of these two groups to the generosity and availability of such benefits.

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