The promotion of self-employment as part of active labour market policy ranks as one of the most important support schemes in Germany. The main idea is to grant unemployed individuals financial support to start their own business and therefore to escape unemployment. For this purpose two schemes...

The transition process from unemployment to employment is determined by the reservation wage and the search effort of the unemployed worker. The optimal search strategy depends on labour market institutions like the generosity of unemployment benefits and 'classical' characteristics like age and...