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Company Start-Up Costs and Employment

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  • Christopher A. Pissarides

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. Managers set up firms, post jobs and match with workers. Managers 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

  • Christopher A. Pissarides, 2002. "Company Start-Up Costs and Employment," CEP Discussion Papers dp0520, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0520
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Horst Feldmann, 2008. "Business regulation and labor market performance around the world," Journal of Regulatory Economics, Springer, vol. 33(2), pages 201-235, April.
    2. Christopher A. Pissarides, 2003. "Unemployment in Britain: A European Success Story," CESifo Working Paper Series 981, CESifo.
    3. 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.
    4. Ron Smith & Gylfi Zoega, 2004. "Global Shocks and Unemployment Adjustment," Birkbeck Working Papers in Economics and Finance 0401, Birkbeck, Department of Economics, Mathematics & Statistics.
    5. Lisi, Gaetano, 2013. "The Benchmark Macroeconomic Models of the Labour Market," MPRA Paper 62318, University Library of Munich, Germany.
    6. 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.
    7. Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Working Papers 02.08, Swiss National Bank, Study Center Gerzensee.
    8. Gaetano Lisi, 2018. "NIMBY effect, mortgage payments and firm size: the different impact of homeownership on new businesses," Economics Bulletin, AccessEcon, vol. 38(2), pages 908-915.
    9. Hian Teck Hoon & Margarita Katsimi & Gylfi Zoega, 2018. "Investment, Current Account, and the Long Swings of Unemployment," Birkbeck Working Papers in Economics and Finance 1810, Birkbeck, Department of Economics, Mathematics & Statistics.
    10. Lisi, Gaetano, 2011. "Matching Models of Equilibrium Unemployment: An Overview," MPRA Paper 30191, University Library of Munich, Germany.
    11. Margarita Katsimi & Gylfi Zoega, 2017. "The Modigliani Puzzle Revisited: A Note," CESifo Working Paper Series 6833, CESifo.
    12. Bart Hobijn & Ayşegül Şahin, 2013. "Firms And Flexibility," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 922-940, January.
    13. Smith, Ron & Zoega, Gylfi, 2007. "Global unemployment shocks," Economics Letters, Elsevier, vol. 94(3), pages 433-438, March.
    14. 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.
    15. 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.
    16. 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.

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    More about this item

    Keywords

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

    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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