Latin American countries face important labor market problems, the labor situation being particularly critical for youth, whose unemployment rates are more than double those of adults. Self-employment programs constitute a relatively recent and appealing policy option. Their principal aim is to develop the abilities of entrepreneurial youth to run their own businesses. In the Latin American context, where wage-earning labor demand is insufficient to absorb the increasing labor supply; the principal advantage of this type of program over other policy options is that they are less likely to produce crowding-out effects, that is, to transfer unemployment from policy beneficiaries to non-beneficiaries.
Impact evaluations of two Peruvian self-employment programs targeted at disadvantaged youth find positive effects of these programs on the probability of business creation and on beneficiaries’ earnings. However, empirical evidence of the impacts of self-employment programs is still incipient and much has to be done in this area. Nevertheless, self-employment programs appear as an attractive policy response to youth unemployment, especially taking into account the Latin American context; and therefore they must be regarded as an important component of the global employment creation strategy in these countries. Contributed by Miguel Jaramillo Baanante, dgPoverty Advisor