Second Draft

One potential policy intervention to increase the self-sufficiency prospects for unemployed workers is to allow those eligible for income maintenance to pursue the alternative of creating their own employment by starting their own business. The Canadian program of self-employment assistance evolved in three main phases from its inception in 1985 to the present. This paper examines whether the self-employment strategy results in more successful earnings outcomes for program participants, using administrative data, and whether the three policy regimes differ in their relative effectiveness. The empirical evidence provides support for the hypothesis that total earnings from paid and self-employment are improved by adding a self-employment option to earning a living. This increase in self-sufficiency, however, appears to be affected by program changes and self-selection issues. ACKNOWLEDGEMENTS For the preparation of a complex and large Human Resources Development Canada administrative data set, we would like to thank Nazish Ahmad, Walter Kardas and Lesle Wesa. We have also benefitted from the comments and suggestions of Yigal Messeri and Tom Siedule on the sampling and analytical approaches. Any remaining errors are our own