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Reducing Start-up costs for New Firms: The Double Dividend on the Labor Market

Author

Listed:
  • Paul Frijters
  • Uwe Dulleck
  • Rudolf Winter-Ebmer

    (School of Economics and Finance, Queensland University of Technology)

Abstract

Starting a firm with expansive potential is an option for educated and high-skilled workers. If there are labor market frictions, this additional option can be seen as reducing the chances of ending up in a low-wage job and hence as increasing the incentives for education. In a matching model, we show that reducing the start-up costs for new firms results in higher take-up rates of education. It also gives rise through a thick-market externality to higher rates of job creation for high-skilled labor as well as average match productivity. We provide empirical evidence to support our argument.

Suggested Citation

  • Paul Frijters & Uwe Dulleck & Rudolf Winter-Ebmer, 2006. "Reducing Start-up costs for New Firms: The Double Dividend on the Labor Market," School of Economics and Finance Discussion Papers and Working Papers Series 208a, School of Economics and Finance, Queensland University of Technology.
  • Handle: RePEc:qut:dpaper:208a
    as

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    File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2006/WP208a.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Gaetano Lisi & Maurizio Pugno, 2015. "A matching model of endogenous growth and underground firms," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(4), pages 347-369, December.
    2. Frijters, Paul & Kong, Tao Sherry & Meng, Xin, 2011. "Migrant Entrepreneurs and Credit Constraints under Labour Market Discrimination," IZA Discussion Papers 5967, Institute for the Study of Labor (IZA).
    3. World Bank & International Finance Corporation, 2013. "Doing Business 2014 : Understanding Regulations for Small and Medium-Size Enterprises," World Bank Publications, The World Bank, number 16204, June.
    4. Ferrante, Francesco & Ruiu, Gabiele, 2014. "Entrepreneurship. How important are institutions and culturally-based prior beliefs?," MPRA Paper 41915, University Library of Munich, Germany.
    5. Lee Branstetter & Francisco Lima & Lowell J. Taylor & Ana Venâncio, 2014. "Do Entry Regulations Deter Entrepreneurship and Job Creation? Evidence from Recent Reforms in Portugal," Economic Journal, Royal Economic Society, vol. 124(577), pages 805-832, June.
    6. Gaetano Lisi & Maurizio Pugno, 2011. "Tax Morale, Entrepreneurship, and the Irregular Economy," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(2), pages 116-131, August.
    7. 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.
    8. Raquel Fonseca & Natalia Utrero González, 2004. "Do Market Regulation and Financial Imperfections Affect Firm Size? New Empirical Evidence," CSEF Working Papers 119, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    9. 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.
    10. Djankov, Simeon, 2008. "The Regulation of Entry: A Survey," CEPR Discussion Papers 7080, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Matching; education; start-up costs; venture capital; bureaucratic hurdles;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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