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Firm-level employment, labour market reforms, and bank distress

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  • Setzer, Ralph
  • Stieglitz, Moritz

Abstract

We explore the interaction between labour market reforms and financial frictions. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation. JEL Classification: G21, J21, J60, K31

Suggested Citation

  • Setzer, Ralph & Stieglitz, Moritz, 2019. "Firm-level employment, labour market reforms, and bank distress," Working Paper Series 2334, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20192334
    Note: 1128184
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    More about this item

    Keywords

    bank stress; employment protection; structural reforms; unemployment insurance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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