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Labour costs and the decision to hire the first employee

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  • Cockx, B.
  • Desiere, Sam

Abstract

Firms without paid employees account for up to 80% of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13%, we find that the number of new, first-time employers jumped by 31% immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is −2.39 [95% CI: −3.45, −1.25].

Suggested Citation

  • Cockx, B. & Desiere, Sam, 2023. "Labour costs and the decision to hire the first employee," ROA Research Memorandum 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    • Handle: RePEc:unm:umaror:2023001
    DOI: 10.26481/umaror.2023001
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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