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Capital Market Institutions and Venture Capital: Do They Affect Unemployment and Labour Demand?

  • Rainer Fehn
  • Thomas Fuchs


This paper analyses the influence of the capital market on the labour market. Especially the impact of start-up financing on the structure of unemployment is of interest. We use a cross-country panel data analysis to examine how venture capital investment influences disaggre-gate unemployment. As we expected, venture capital investment has different influences on sectoral-, educational- and occupational-specific unemployment. We suggest, on the basis of the regression results that venture capital investment is a catalyst of structural change and has contributed to the faster growing internet and new economy sector in countries like the U.S. that have a well-developed venture capital market.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 898.

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Date of creation: 2003
Date of revision:
Handle: RePEc:ces:ceswps:_898
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  1. Acemoglu, Daron & Aghion, Philippe & Zilibotti, Fabrizio, 2002. "Distance to Frontier, Selection, and Economic Growth," CEPR Discussion Papers 3467, C.E.P.R. Discussion Papers.
  2. Christian Keuschnigg & Soren Bo Nielsen, 2000. "Tax Policy, Venture Capital, and Entrepreneurship," Econometric Society World Congress 2000 Contributed Papers 1848, Econometric Society.
  3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  4. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  5. Engel, Dirk, 2001. "Höheres Beschäftigungswachstum durch Venture Capital?," ZEW Discussion Papers 01-34, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  7. Max Keilbach & Dirk Engel, . "Firm Level Implications of Early Stage Venture Capital Investment - An Empiri cal Investigation," Papers on Entrepreneurship, Growth and Public Policy 2005-22, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  8. 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.
  9. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  10. Colin Mayer & Wendy Carlin, 1999. "Finance, Investment and Growth," Economics Series Working Papers 1999-FE-09, University of Oxford, Department of Economics.
  11. Franklin Allen & Douglas Gale, 1999. "Diversity of Opinion and Financing of New Technologies," Center for Financial Institutions Working Papers 98-30, Wharton School Center for Financial Institutions, University of Pennsylvania.
  12. Michael Leahy & Sebastian Schich & Gert Wehinger & Florian Pelgrin & Thorsteinn Thorgeirsson, 2001. "Contributions of Financial Systems to Growth in OECD Countries," OECD Economics Department Working Papers 280, OECD Publishing.
  13. John H. Boyd & Bruce D. Smith, 1995. "The evolution of debt and equity markets in economic development," Working Papers 542, Federal Reserve Bank of Minneapolis.
  14. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc.
  15. Josh Lerner, 1996. "The Government as Venture Capitalist: The Long-Run Effects of the SBIR Program," NBER Working Papers 5753, National Bureau of Economic Research, Inc.
  16. Freear, John & Wetzel, William Jr., 1990. "Who bankrolls high-tech entrepreneurs?," Journal of Business Venturing, Elsevier, vol. 5(2), pages 77-89, March.
  17. Chenggang Xu & Haizhou Huang, 1999. "Institutions, innovations, and Growth," IMF Working Papers 99/34, International Monetary Fund.
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