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Company start-up costs and employment

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  • Pissarides, Christopher

Abstract

I study the role of company start-up costs for employment performance. The model is search equilibrium with a new concept for firms. Agents have an innate managerial ability and make a career choice to become either managers or workers. Manage rs set up firms, post jobs and match with workers. I show that in equilibrium career choice and job creation are jointly determined. Higher start-up costs reduce overall employment but increase the size of incumbent firms. I discuss some cross-country OECD evidence which supports the model’s main proposition.

Suggested Citation

  • Pissarides, Christopher, 2002. "Company start-up costs and employment," LSE Research Online Documents on Economics 2200, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:2200
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    File URL: http://eprints.lse.ac.uk/2200/
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    References listed on IDEAS

    as
    1. 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 1-33, March.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
    4. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
    5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, March.
    6. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, July.
    7. Donald A. Walker (ed.), 2000. "Equilibrium," Books, Edward Elgar Publishing, volume 0, number 1585, June.
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    Citations

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    Cited by:

    1. Smith, Ron & Zoega, Gylfi, 2007. "Global unemployment shocks," Economics Letters, Elsevier, vol. 94(3), pages 433-438, March.
    2. Horst Feldmann, 2008. "Business regulation and labor market performance around the world," Journal of Regulatory Economics, Springer, vol. 33(2), pages 201-235, April.
    3. Christopher A. Pissarides, 2003. "Unemployment in Britain: A European Success Story," CESifo Working Paper Series 981, CESifo Group Munich.
    4. Lisi GAETANO, 2010. "The Unemployment Volatility Puzzle: The Role Of The Underground Economy," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(2(12)/Sum), pages 59-69.
    5. Gaetano Lisi & Maurizio Pugno, 2010. "Entrepreneurship and the Hidden Economy: An Extended Matching Model," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 587-605.
    6. Bart Hobijn & Ayşegül Şahin, 2013. "Firms And Flexibility," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 922-940, January.
    7. Monique Ebell & Christian Haefke, 2002. "Product market deregulation and labor market outcomes," Economics Working Papers 726, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2003.
    8. Lisi, G., 2011. "Entrepreneurship, On-the-job Search and Informal Jobs," Journal of the New Economic Association, New Economic Association, issue 9, pages 33-46.
    9. Lisi, Gaetano, 2010. "Introduzione allo studio dei modelli di "matching" del mercato del lavoro
      [Introduction to the study of matching models of unemployment]
      ," MPRA Paper 22735, University Library of Munich, Germany.
    10. Margarita Katsimi & Gylfi Zoega, 2017. "The Modigliani Puzzle Revisited: A Note," CESifo Working Paper Series 6833, CESifo Group Munich.

    More about this item

    Keywords

    Start-up costs; regulation; employment; OECD unemployment; search and matching.;

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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