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Reducing start-up costs for New Firms: The double dividend on the labor market

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Author Info
Uwe Dulleck
Paul Frijters
Rudolf Winter-Ebmer

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Abstract

Starting a firm with expansive potential is an option for educated and high-skilled workers. This option serves as an insurance against unemployment caused by labor market frictions and hence increases the incentives for education. We show within a matching model that reducing the start-up costs for new firms results in higher take-up rates of education. It also leads, through a thick-market externality, to higher rates of job creation for high-skilled labor as well as average match productivity. We provide empirical evidence to support our argument.

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Publisher Info
Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2003-13.

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Date of creation: Oct 2003
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Handle: RePEc:jku:econwp:2003_13

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Related research
Keywords: Matching; Education; Start-up costs; Venture capital; Bureaucratic hurdles;

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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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.:
  1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Ansgar Belke & Rainer Fehn & Neil Foster, 2003. "Does Venture Capital Investment Spur Employment Growth?," Vienna Economics Papers 0303, University of Vienna, Department of Economics. [Downloadable!]
    Other versions:
  3. Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," CEPR Discussion Papers 2953, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. repec:dgr:uvatin:20030046 is not listed on IDEAS
  5. David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Le, Anh T, 1999. " Empirical Studies of Self-Employment," Journal of Economic Surveys, Blackwell Publishing, vol. 13(4), pages 381-416, September. [Downloadable!] (restricted)
  7. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August. [Downloadable!] (restricted)
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  8. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August. [Downloadable!] (restricted)
  9. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October. [Downloadable!] (restricted)
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  10. Burdett, Ken & Smith, Eric, 2002. "The low skill trap," European Economic Review, Elsevier, vol. 46(8), pages 1439-1451, September. [Downloadable!] (restricted)
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  11. Justin van der Sluis & Mirjam van Praag & Wim Vijverberg, 2005. "Entrepreneurship Selection and Performance: A Meta-Analysis of the Impact of Education in Developing Economies," World Bank Economic Review, Oxford University Press, vol. 19(2), pages 225-261.
  12. Masters, Adrian M, 1998. "Efficiency of Investment in Human and Physical Capital in a Model of Bilateral Search and Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 477-94, May.
  13. Devine, Theresa J, 1994. "Changes in Wage-and-Salary Returns to Skill and the Recent Rise in Female Self-Employment," American Economic Review, American Economic Association, vol. 84(2), pages 108-13, May. [Downloadable!] (restricted)
  14. Winter-Ebmer, Rudolf & Wirz, Aniela, 2002. "Public Funding and Enrolment into Higher Education in Europe," IZA Discussion Papers 503, Institute for the Study of Labor (IZA). [Downloadable!]
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  15. Solon, Gary, 1999. "Intergenerational mobility in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 29, pages 1761-1800 Elsevier. [Downloadable!] (restricted)
  16. Audretsch, David B. & Santarelli, Enrico & Vivarelli, Marco, 1999. "Start-up size and industrial dynamics: some evidence from Italian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 965-983, October. [Downloadable!] (restricted)
  17. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
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  18. 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. [Downloadable!] (restricted)
  19. Angrist, Joshua D. & Krueger, Alan B., 1999. "Empirical strategies in labor economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 23, pages 1277-1366 Elsevier. [Downloadable!] (restricted)
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  20. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June. [Downloadable!] (restricted)
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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. Raquel Fonseca & Natalia Utrero González, 2004. "Do Market Regulation and Financial Imperfections Affect Firm Size? New Empirical Evidence," CSEF Working Papers 119, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  2. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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