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The Costs of Firm Exit and Labour Market Policies: New Evidence from Europe

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  • Andrews Dan

    (Economics Department, OECD, Paris, France)

  • Ferrari Irene

    (Munich Center for the Economics of Aging - Max-Planck-Institute for Social Law and Social Policy, Munich, Germany)

  • Saia Alessandro

    (Department of Economics - University of Lausanne, Lausanne, Switzerland)

Abstract

The churning of firms is an inherent process of industrialized economies, which entails a high rate of job destruction. Thus, a key question is: what are the policies that minimize the costs of worker displacement due to business closure? Accordingly, this paper exploits a retrospective panel of workers in 13 European countries over the period 1985–2008 to explore the factors which shape the reemployment prospects of workers displaced due to business closure. The results suggest that higher spending on active labour market policies increases the reemployment prospects of the unemployed workers displaced by business closure, both in terms of unemployment duration and in terms of stability of reemployment. On the contrary, there is evidence of a negative and sizable impact of passive labour market policies on unemployment duration.

Suggested Citation

  • Andrews Dan & Ferrari Irene & Saia Alessandro, 2019. "The Costs of Firm Exit and Labour Market Policies: New Evidence from Europe," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-24, January.
  • Handle: RePEc:bpj:bejeap:v:19:y:2019:i:1:p:24:n:1
    DOI: 10.1515/bejeap-2017-0211
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    More about this item

    Keywords

    worker displacement; business closure; labour market programmes;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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