Why do subsidised firms survive longer? An evaluation of a program promoting youth entrepreneurship in Italy

Abstract

We evaluate an Italian programme which promotes youth entrepreneurship by issuing substantial benefits to candidate entrepreneurs selected through a screening process and by providing them with some training. Following previous informal analyses of this programme performance the outcome with respect to which we perform the evaluation is the firm survival time. We argue that what matters for the success of the programme is not how effective the subsidy is per se in keeping firms alive but how well selected and trained the beneficiaries are. A major implication is that the impact of the subsidy on the firms survival chances is not the parameter of interest here; rather, we need to assess whether as a result of the screening and the training process selected firms are enough good to survive on their own. After constructing a sample of spontaneous firms comparable to the subsidised ones with respect to some observable characteristics by matching and weighting we show that previous results favourable to the programme badly overstated its effectiveness. We also show that a simple criterion based on the pattern of the hazard function casts serious doubts on the programme ability to yield firms whose survival chances do not depend on the subsidy.