Financial Fragility, Business Creation and Job Destruction
AbstractWe build a model of endogenous destruction with credit and labor market imperfections, represented by a matching process between financiers and entrepreneurs on one hand, and entrepreneurs and workers on the other hand. Business creation, credit opening and job destruction represent three active margins of the model. Financial imperfections lead to financial fragility. This implies the existence of a forth latent margin which may be activated in the case of repudiation of financial contracts. This paradigm is applied to the recent development of the U.S. economy. An empirical test in panel of OECD countries further suggests the importance of venture capital for macroeconomic variables.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 2002026.
Date of creation: 01 Jun 2002
Date of revision:
Credit and Search Frictions; Unemployment; New Economy; Monetary Policy;
Other versions of this item:
- Étienne Wasmer & Philippe Weil, 2002. "Financial Fragility, Business Creation and Job Destruction," Recherches économiques de Louvain, De Boeck Université, vol. 68(1), pages 185-202.
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
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