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Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter?

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  • Ansgar Belke
  • Rainer Fehn

Abstract

This paper analyzes whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unemployment than most continental-European OECD-countries. It is argued that the often-blamed labor market rigidities alone, while important, do not provide a satisfactory explanation for these differences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the “new economy”. Highly developed venture capital markets should help to alleviate such financial constraints. This view that labor-market institutions should be supplemented by capital market imperfections for explaining differences in employment performances is supported by our panel data analysis, in which venture capital turns out to be a significant institutional variable.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 504.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_504

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Keywords: Labor markets; unemployment; new economy; panel analysis; venture capital;

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References

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Citations

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Cited by:
  1. Berthold, Norbert & Fehn, Rainer, 2002. "Struktureller Wandel, new economy und Beschäftigungsentwicklung: welche Rolle spielen die institutionellen Rahmenbedingungen auf dem Kapitalmarkt?," Wirtschaftswissenschaftliche Beiträge 53, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.
  2. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2012. "Unemployment and finance: how do financial and labour market factors interact?," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 464-489, July.
  3. Donatella Gatti & Anne-Gael Vaubourg, 2010. "Credit and Unemployment: Do Institutions Matter?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 37-43, 04.
  4. Calcagnini, Giorgio & Saltari, Enrico, 2003. "Labour and Financial Market Determinants of Investment Decisions in Europe," EIFC - Technology and Finance Working Papers 26, United Nations University, Institute for New Technologies.
  5. Norbert Berthold & Rainer Fehn, 2003. "Unemployment in Germany: Reasons and Remedies," CESifo Working Paper Series 871, CESifo Group Munich.
  6. Calcagnini, Giorgio & Ferrando, Annalisa & Giombini, Germana, 2014. "Does employment protection legislation affect firm investment? The European case," Economic Modelling, Elsevier, vol. 36(C), pages 658-665.
  7. Fehn, Rainer, 2002. "Arbeitsmarktflexibilisierung und Arbeitslosigkeit," Wirtschaftswissenschaftliche Beiträge 54, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.
  8. Fehn, Rainer, 2001. "Ist die Globalisierung der Totengräber nationaler Sozialpolitik?," Wirtschaftswissenschaftliche Beiträge 43, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.
  9. Rainer Fehn & Carsten-Patrick Meier, 2001. "The Positive Economics of Labor Market Rigidities and Investor Protection," CESifo Working Paper Series 456, CESifo Group Munich.
  10. Ansgar Belke & Ralph Setzer, 2003. "Exchange Rate Variability and Labor Market Performance in the Visegrád Countries," Economic Change and Restructuring, Springer, vol. 36(2), pages 153-175, June.
  11. Calcagnini, Giorgio & Giombini, Germana & Saltari, Enrico, 2009. "Financial and labor market imperfections and investment," Economics Letters, Elsevier, vol. 102(1), pages 22-26, January.
  12. Giorgio Calcagnini & Germana Giombini & Enrico Saltari, 2009. "Firms’ Investment in the Presence of Labor and Financial Market Imperfections," Working Papers 0901, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2009.
  13. Linzert, Tobias, 2005. "The Unemployment Inflation Trade-Off in the Euro Area," IZA Discussion Papers 1699, Institute for the Study of Labor (IZA).
  14. Giorgio Calcagnini & Annalisa Ferrando & Germana Giombini, 2013. "Multiple Market Imperfections, Firm Profitability and Investment," Working Papers 1305, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
  15. Fehn, Rainer, 2001. "Korporatismus auf dem Arbeitsmarkt und institutionelle Rahmenbedingungen auf dem Kapitalmarkt: zwei Seiten ein- und derselben Medaille?," Wirtschaftswissenschaftliche Beiträge 46, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.

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