IDEAS home Printed from
   My bibliography  Save this article

Financial and labor market imperfections and investment


  • Calcagnini, Giorgio
  • Giombini, Germana
  • Saltari, Enrico


This paper analyses how financial and labor market imperfections jointly influence investment. The contemporaneous presence of imperfections gives rise to a negative correlation between EPL and investment. Our results support the policies promoted by European institutions to reform both markets.

Suggested Citation

  • Calcagnini, Giorgio & Giombini, Germana & Saltari, Enrico, 2009. "Financial and labor market imperfections and investment," Economics Letters, Elsevier, vol. 102(1), pages 22-26, January.
  • Handle: RePEc:eee:ecolet:v:102:y:2009:i:1:p:22-26

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Timothy Erickson & Toni M. Whited, 2000. "Measurement Error and the Relationship between Investment and q," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1027-1057, October.
    2. Belke, Ansgar & Fehn, Rainer & Foster, Neil, 2001. "Venture capital investment and labor market performance: a panel data analysis," Discussion Paper Series 50, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    3. Abel, Andrew B & Eberly, Janice C, 1994. "A Unified Model of Investment under Uncertainty," American Economic Review, American Economic Association, vol. 84(5), pages 1369-1384, December.
    4. Ansgar Belke & Rainer Fehn, "undated". "Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter?," German Working Papers in Law and Economics 2001-default/2001/1-1008, Berkeley Electronic Press.
    5. Cleary, Sean & Povel, Paul & Raith, Michael, 2007. "The U-Shaped Investment Curve: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 1-39, March.
    6. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, June.
    7. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    8. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 2000. "Investment-Cash Flow Sensitivities are Useful: A Comment on Kaplan and Zingales," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 695-705.
    9. Stephen Bond & Costas Meghir, 1994. "Dynamic Investment Models and the Firm's Financial Policy," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 197-222.
    10. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    11. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    12. Saint-Paul, Gilles, 2002. "Macroeconomic Fluctuations and the Timing of Labor Market Reform," IDEI Working Papers 146, Institut d'Économie Industrielle (IDEI), Toulouse.
    13. Giovanni Pica, 2001. "Labour Demand and Financial Markets Imperfections," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2001(73).
    14. Inessa Love, 2003. "Financial Development and Financing Constraints: International Evidence from the Structural Investment Model," Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 765-791, July.
    15. Sílvio Rendon, 2004. "Job Creation and Investment in Imperfect Capital and Labor Markets," Economic Working Papers at Centro de Estudios Andaluces E2004/35, Centro de Estudios Andaluces.
    16. Belke, Ansgar & Gocke, Matthias & Hebler, Martin, 2005. "Institutional uncertainty and European Social Union: Impacts on job creation and destruction in the CEECs," Journal of Policy Modeling, Elsevier, vol. 27(3), pages 345-354, April.
    17. Saint-Paul, Gilles, 2002. "Some Thoughts on Macroeconomic Fluctuations and the Timing of Labor Market Reform," IZA Discussion Papers 611, Institute for the Study of Labor (IZA).
    18. Beck, Thorsten & Asl Demirguc-Kunt & Maksimovic, Vojislav, 2002. "Financing patterns around the world : the role of institutions," Policy Research Working Paper Series 2905, The World Bank.
    19. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
    20. Joao F. Gomes, 2001. "Financing Investment," American Economic Review, American Economic Association, vol. 91(5), pages 1263-1285, December.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Etienne Wasmer & Alexandre Janiak, 2014. "Employment protection and capital-labor ratios," Sciences Po Economics Discussion Papers 2014-11, Sciences Po Departement of Economics.
    2. Rault, Christophe & Vaubourg, Anne-Gaël, 2011. "Labour Market Institutions and Unemployment: Does Finance Matter?," IZA Discussion Papers 5606, Institute for the Study of Labor (IZA).
    3. Enrico Saltari, 2012. "The role of ICT and Business Services in Italy," Working Papers 152, University of Rome La Sapienza, Department of Public Economics.
    4. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
    5. Saltari, Enrico & Travaglini, Giuseppe, 2011. "Optimal abatement investment and environmental policies under pollution uncertainty," MPRA Paper 35072, University Library of Munich, Germany.
    6. Etienne Wasmer & Alexandre Janiak, 2014. "Employment protection and capital-labor ratios," Sciences Po publications 33, Sciences Po.
    7. Calcagnini, Giorgio & Travaglini, Giuseppe, 2014. "A time series analysis of labor productivity. Italy versus the European countries and the U.S," Economic Modelling, Elsevier, vol. 36(C), pages 622-628.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:102:y:2009:i:1:p:22-26. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.