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Financial Development, Labor and Market Regulations and Growth

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Author Info
Raquel Fonseca
Natalia Utrero-González () (Departament d'Economia de l'Empresa, Universitat Autonoma de Barcelona)

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Abstract

This paper investigates the importance that market regulation and financial imperfections have on firm growth. We analyse institutions affecting labor market as Employment Protection Laws (EP) and Product Market Regulation (PM). We show that together with the beneficial effects of financial development, a firm will get less financing, and thus investless, in a weak financial market (finance effect), the strictness of product and labor market regulations also affect firm growth (labor effect). In particular, we show that the stricter the rules the more detrimental the influence on growth in sectoral value added for a large number of coun-tries. We also show that the labor effect overcomes the positive finance effect.

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File URL: http://selene.uab.es/dep-economia-empresa/documents/05-3.pdf
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Publisher Info
Paper provided by Department of Business Economics, Universitat Autonoma de Barcelona in its series Working Papers with number 200503.

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Date of creation: May 2005
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Handle: RePEc:bbe:wpaper:200503

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Related research
Keywords: Financial development; labor and product market institutions; growth;

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Find related papers by JEL classification:
G2 - Financial Economics - - Financial Institutions and Services
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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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.:
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  6. Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 467-482.
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  24. Stijn Claessens & Luc Laeven, 2003. "Financial Development, Property Rights, and Growth," Journal of Finance, American Finance Association, vol. 58(6), pages 2401-2436, December. [Downloadable!] (restricted)
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  25. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD, Economics Department. [Downloadable!]
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Full references

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.)

  1. Guglielmo Barone & Federico Cingano, 2008. "Service regulation and growth: evidence from OECD countries," Temi di discussione (Economic working papers) 675, Bank of Italy, Economic Research Department. [Downloadable!]
  2. Andrea Bikfalvi & Christian Serarols & David Urbano & Yancy Vaillant, 2007. "Technological Trampolines for new venture creation in Catalonia: the case of University of Girona," Working Papers 200701, Department of Business Economics, Universitat Autonoma de Barcelona. [Downloadable!]
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