The impact of labour unemployment insurance on entrepreneurial intention and new business creation

Based on a panel analysis of 50 US states over the period 2005-2022, we find that increased unemployment benefits, either by increasing the weekly unemployment benefit amount or the number of weeks to claim unemployment benefits, are associated with higher business applications and formations. This confirms that a more generous unemployment insurance scheme promotes entrepreneurial intention and new business creation. From a policy perspective, our finding suggests that policymakers should be aware that higher unemployment benefits foster entrepreneurial initiatives and new business formation even though the labour unemployment insurance system is not designed for these purposes.