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Structural unemployment and the costs of firm entry and exit

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  • 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.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

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

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Handle: RePEc:eee:labeco:v:23:y:2013:i:c:p:1-19

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Web page: http://www.elsevier.com/locate/labeco

Related research

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

References

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Cited by:
  1. Alexandre Janiak & Etienne Wasmer, 2012. "EPL and capital-labor ratios," Documentos de Trabajo 288, Centro de Economía Aplicada, Universidad de Chile.
  2. 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.

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