Advanced Search
MyIDEAS: Login to save this article or follow this journal

Structural unemployment and the costs of firm entry and exit

Contents:

Author Info

  • Janiak, Alexandre

Abstract

I build a large-firm model of the labor market with matching frictions and firm turnover. Firms hire both labor and capital. The model allows me to assess the impact of two regulatory frictions on unemployment: i) the administrative costs of establishing a new firm and ii) the share of capital entrepreneurs recover when exiting. These regulations explain half the unemployment gap between Continental Europe and the United States in the calibrated model. More precisely, exit regulation is responsible for the entire explained gap, with entry regulation playing no role. The degree of returns to scale and the presence of fixed capital in the model are important assumptions behind these results.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S092753711300016X
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 23 (2013)
Issue (Month): C ()
Pages: 1-19

as in new window
Handle: RePEc:eee:labeco:v:23:y:2013:i:c:p:1-19

Contact details of provider:
Web page: http://www.elsevier.com/locate/labeco

Related research

Keywords: Unemployment; Search; Large firm; Entry and exit regulation;

References

References listed on IDEAS
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.:
as in new window
  1. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
  2. John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, American Economic Association, vol. 89(4), pages 921-946, September.
  3. Lei Fang & Richard Rogerson, 2011. "Product Market Regulation and Market Work: A Benchmark Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(2), pages 163-88, April.
  4. Ebell, Monique & Haefke, Christian, 2006. "Product Market Deregulation and the U.S. Employment Miracle," IZA Discussion Papers 1946, Institute for the Study of Labor (IZA).
  5. Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2953, C.E.P.R. Discussion Papers.
  6. Christopher Pissarides, 2007. "The unemployment volatility puzzle: is wage stickiness the answer?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 4460, London School of Economics and Political Science, LSE Library.
  7. Robert E. Hall & Paul R. Milgrom, 2008. "The Limited Influence of Unemployment on the Wage Bargain," American Economic Review, American Economic Association, American Economic Association, vol. 98(4), pages 1653-74, September.
  8. Marcelo Veracierto, 2000. "Employment flows, capital mobility, and policy analysis," Working Paper Series, Federal Reserve Bank of Chicago WP-00-5, Federal Reserve Bank of Chicago.
  9. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," NBER Working Papers 4097, National Bureau of Economic Research, Inc.
  10. Lars Ljungqvist & Thomas J. Sargent, 1996. "The European Unemployment Dilemma," EUI-RSCAS Working Papers, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS) 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  11. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(482), pages 829-853, October.
  12. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(5), pages 958-992, October.
  13. Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2006. "Debt Enforcement Around the World," NBER Working Papers 12807, National Bureau of Economic Research, Inc.
  14. Rupert, Peter & Wasmer, Etienne, 2009. "Housing and the Labor Market: Time to Move and Aggregate Unemployment," University of California at Santa Barbara, Economics Working Paper Series qt1bv529kn, Department of Economics, UC Santa Barbara.
  15. Andrea Bassanini & Romain Duval, 2006. "The determinants of unemployment across OECD countries: Reassessing the role of policies and institutions," OECD Economic Studies, OECD Publishing, vol. 2006(1), pages 7-86.
  16. Lars Ljungqvist & Thomas J. Sargent, 2008. "Two Questions about European Unemployment," Econometrica, Econometric Society, Econometric Society, vol. 76(1), pages 1-29, 01.
  17. Bertola, Giuseppe & Caballero, Ricardo J, 1994. "Cross-Sectional Efficiency and Labour Hoarding in a Matching Model of Unemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 435-56, July.
  18. Nezih Guner & Gustavo Ventura & Xu Yi, 2008. "Macroeconomic Implications of Size-Dependent Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 721-744, October.
  19. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," NBER Working Papers 2115, National Bureau of Economic Research, Inc.
  20. Hernan Moscoso Boedo & Toshihiko Mukoyama, 2012. "Evaluating the effects of entry regulations and firing costs on international income differences," Journal of Economic Growth, Springer, Springer, vol. 17(2), pages 143-170, June.
  21. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
  22. Atkenson, Andrew & Khan, Aubhik & Ohanian, Lee, 1996. "Are data on industry evolution and gross job turnover relevant for macroeconomics?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 44(1), pages 215-239, June.
  23. James S. Costain & Michael Reiter, 2003. "Business cycles, unemployment insurance and the calibration of matching models," Economics Working Papers 872, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2006.
  24. Giuseppe Bertola & Pietro Garibaldi, 2001. "Wages and the Size of Firms in Dynamic Matching Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 335-368, April.
  25. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  26. Quentin Max David & Alexandre Janiak & Etienne Wasmer, 2012. "Local social capital and geographical mobility," ULB Institutional Repository 2013/133081, ULB -- Universite Libre de Bruxelles.
  27. Asplund, Marcus, 1995. "What Fraction of a Capital Investment is Sunk Cost?," Working Paper Series in Economics and Finance 68, Stockholm School of Economics, revised 24 Sep 1999.
  28. Alexandre Janiak & Paulo Santos Monteiro, 2009. "Inflation and welfare in long-run equilibrium with firm dynamics," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 261, Centro de Economía Aplicada, Universidad de Chile.
  29. Francesco Caselli, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3567, London School of Economics and Political Science, LSE Library.
  30. Olivier Blanchard & Francesco Giavazzi, . "Macroeconomic effects of regulation and deregulation in goods and labor markets," Working Papers 187, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  31. Julio J. Rotemberg & Michael Woodford, 1989. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," NBER Working Papers 3206, National Bureau of Economic Research, Inc.
  32. Aubhik Khan & Julia K. Thomas, 2004. "Idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics," Working Papers 04-15, Federal Reserve Bank of Philadelphia.
  33. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(3), pages 699-726, August.
  34. Gourio, Francois & Kashyap, Anil K, 2007. "Investment spikes: New facts and a general equilibrium exploration," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(Supplemen), pages 1-22, September.
  35. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
  36. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
  37. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(462), pages C1-33, March.
  38. Manuel Toledo & Jose I. Silva, 2005. "Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment," 2005 Meeting Papers, Society for Economic Dynamics 775, Society for Economic Dynamics.
  39. Biais, Bruno & Mariotti, Thomas, 2003. "Credit, Wages and Bankruptcy Laws," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3996, C.E.P.R. Discussion Papers.
  40. Etienne Wasmer & Philippe Weil, 2004. "The Macroeconomics of Labor and Credit Market Imperfections," American Economic Review, American Economic Association, American Economic Association, vol. 94(4), pages 944-963, September.
  41. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
  42. Marcus Hagedorn & Iourii Manovskii, 2007. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," IEW - Working Papers 351, Institute for Empirical Research in Economics - University of Zurich.
  43. Cahuc, Pierre & Wasmer, Etienne, 2001. "Does Intrafirm Bargaining Matter In The Large Firm'S Matching Model?," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 5(05), pages 742-747, November.
  44. Cahuc, Pierre & Marque, François & Wasmer, Etienne, 2004. "A Theory of Wages and Labour Demand with Intra-firm Bargaining and Matching Frictions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4605, C.E.P.R. Discussion Papers.
  45. Riccardo DiCecio & Levon Barseghyan, 2010. "Entry Costs, Industry Structure, and Cross-Country Income and TFP Differences," 2010 Meeting Papers, Society for Economic Dynamics 964, Society for Economic Dynamics.
  46. Ramey, Valerie A. & Shapiro, Matthew D., 1998. "Costly capital reallocation and the effects of government spending," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 48(1), pages 145-194, June.
  47. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 546, Board of Governors of the Federal Reserve System (U.S.).
  48. Messina, Julián, 2003. "The role of product market regulations in the process of structural change," Working Paper Series, European Central Bank 0217, European Central Bank.
  49. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  50. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  51. Bertrand, Marianne & Kramarz, Francis, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," IZA Discussion Papers 415, Institute for the Study of Labor (IZA).
  52. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and Measuring Organization Capital," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 1026-1053, October.
  53. Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," NBER Working Papers 12167, National Bureau of Economic Research, Inc.
  54. Saint-Paul, G., 1991. "The High Unemployment Trap," DELTA Working Papers, DELTA (Ecole normale supérieure) 91-01, DELTA (Ecole normale supérieure).
  55. Douglas Gollin, 2001. "Nobody's Business but My Own: Self Employment and Small Enterprise in Economic Development," Center for Development Economics, Department of Economics, Williams College 172, Department of Economics, Williams College.
  56. Paul Gomme & Peter Rupert, 2005. "Theory, measurement, and calibration of macroeconomic models," Working Paper 0505, Federal Reserve Bank of Cleveland.
  57. Markus Poschke, 2006. "The regulation of entry and aggregate productivity," Economics Working Papers, European University Institute ECO2006/21, European University Institute.
  58. Mark Bils & Yongsung Chang & Sun-Bin Kim, 2011. "Worker Heterogeneity and Endogenous Separations in a Matching Model of Unemployment Fluctuations," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 128-54, January.
  59. Richard Rogerson, 2007. "Structural Transformation and the Deterioration of European Labor Market Outcomes," NBER Working Papers 12889, National Bureau of Economic Research, Inc.
  60. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(5), pages 915-38, October.
  61. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, December.
  62. Bergin, Paul R. & Corsetti, Giancarlo, 2008. "The extensive margin and monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(7), pages 1222-1237, October.
  63. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 676-90, September.
  64. Smith, Eric, 1994. "Search, Concave Production, and Optimal Firm Size," CEPR Discussion Papers, C.E.P.R. Discussion Papers 882, C.E.P.R. Discussion Papers.
  65. Bruno Biais & Thomas Mariotti, 2009. "Credit, wages and bankruptcy laws," Working Papers 245709, Institut National de la Recherche Agronomique, France.
  66. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h482kc28p is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. World Bank & International Finance Corporation, 2013. "Doing Business 2014 : Understanding Regulations for Small and Medium-Size Enterprises," World Bank Publications, The World Bank, number 16204, October.
  2. Alexandre Janiak & Etienne Wasmer, 2012. "EPL and capital-labor ratios," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 288, Centro de Economía Aplicada, Universidad de Chile.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:23:y:2013:i:c:p:1-19. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.