In this study on labour input and wage formation in Finland the importance of liquidity constraints measured by the ratio of interest payments to cash flow is examined. Financial solvency problems are shown to lead to a reduction in labour input, potentially explaining for the most part the 16% peak rate of unemployment during the deep recession period in the beginning of the 1990s. The link between leverage and “real-side” behaviour of firms is, hence, clear in labour input decisions. The large impact of leverage on employment can be explained by rigid wages and liquidity constraints. Labour hoarding and fixed costs in recruitment increase the long run effects, but also explain the weaker immediate effect as the level of liquidity constraints goes up.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Find related papers by JEL classification: J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)