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Credit Market Imperfections and Persistent Unemployment

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  • Daron Acemoglu

Abstract

This paper develops the thesis that credit market frictions may be an important contributor to high unemployment in Europe. When a change in the technological regime necessitates the creation of new firms, this can happen relatively rapidly in the U.S. where credit markets function efficiently. In contrast, in Europe, job creation is constrained by credit market imperfections, so unemployment rises and remains high for an extended period. The data show that there has not been slower growth in the most credit dependent industries in Europe relative to the U.S., but the share of employment in these industries is lower than in the U.S.. This suggests that although credit market imperfections are unlikely to have been the major cause of the increase in European unemployment, they may have played some role in limiting European employment growth.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7938.

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Date of creation: Oct 2000
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Publication status: published as Acemoglu, Daron. "Credit Market Imperfections And Persistent Unemployment," European Economic Review, 2001, v45(4-6,May), 665-679.
Handle: RePEc:nbr:nberwo:7938

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