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Reducing Start-up Costs for New Firms: The Double Dividend on the Labor Market

  • Uwe Dulleck
  • Paul Frijters
  • Rudolf Winter-Ebmer

Starting a firm with expansive potential is an option for educated and high-skilled workers. If there are labor market frictions, this additional option can be seen as reducing the chances of ending up in a low-wage job and hence as increasing the incentives for education. In a matching model, we show that reducing the start-up costs for new firms results in higher take-up rates of education. It also gives rise-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. Copyright The editors of the "Scandinavian Journal of Economics" 2006 .

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 108 (2006)
Issue (Month): 2 (07)
Pages: 317-337

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Handle: RePEc:bla:scandj:v:108:y:2006:i:2:p:317-337
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  1. Joshua S. Gans & David H. Hsu & Scott Stern, 2000. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," NBER Working Papers 7851, National Bureau of Economic Research, Inc.
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  7. 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.
  8. 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.
  9. Acemoglu, D. & Shimer, R., 1997. "Efficient Unemployment Insurance," Working papers 97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Ansgar Belke & Rainer Fehn & Neil Foster, 2003. "Does Venture Capital Investment Spur Employment Growth?," CESifo Working Paper Series 930, CESifo Group Munich.
  11. 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).
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