Template-type: ReDif-Paper 1.0
Author-Name: Deng,  Haotian 
Author-Name: Desiere, Sam
Author-Name: Cockx, Bart
Author-workplace-name: ROA / Human capital in the region
Author-Name: Bijnens, Gert
Title: Subsidy for the first hires and firm performance
Abstract: This paper studies how employment subsidies for start-ups shape their performance. We exploit an unexpected policy reform in Belgium that permanently exempted start-ups hiring their first employee from payroll taxes for that employee. Using firm-level administrative data and a regression-discontinuity-in-time design, we find that subsidized post-reform start-ups employed fewer workers and generated lower output, value added, and profits compared to pre-reform start-ups. However, post-reform start-ups were more likely to survive as employers. These effects emerged within the first year after hiring and remained stable over a medium horizon of three years. Our findings indicate a compositional shift: the subsidy primarily induced low-productivity firms to enter the market. As most firms nowadays are nonemployers, our results meaningfully generalize the theoretical implications of standard neoclassical entrepreneurship models (employee–employer margin) and fill the important gap of the nonemployer–employer margin.
Keywords: entrepreneurship, start-up, employment subsidy, tax reduction, labor de-mand;, Small firms
Classification-JEL: h25,j23,j24,j38,l25,l26,m51
Series: ROA Research Memoranda
Creation-Date: 20260224
Number: 001
File-URL: https://cris.maastrichtuniversity.nl/ws/files/299958846/ROA_RM_2026_1.pdf
File-Format: application/pdf
File-Size: 1388818
Handle: Repec:unm:umaror:2026001
DOI: 10.26481/umaror.2026001