We evaluate the effects of unemployment insurance variations in a general equilibrium
occupational choice model of entrepreneurship. We establish that the occupational flow
from unemployment to entrepreneurship is remarkably sensitive to unemployment insurance
generosity, corroborating our empirical findings. Beyond direct effects on unemployment,
we find large reallocations between employment and entrepreneurship relative
to changes in generosity. They contribute to an empirically consistent stable aggregate
employment rate, despite increasing unemployment. We show that an insurance coverage
effect, i.e. a change in the relative riskiness between occupations with respect to generosity,
is a key driver of our results
