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Labor regulations and European venture capital

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  • Bozkaya, Ant
  • Kerr, William R.

Abstract

European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor market insurance mechanisms. Venture capital investors are especially sensitive to these labor adjustment costs. Nations favoring labor market expenditures as the mechanism for providing worker insurance developed stronger venture capital markets over 1990-2008, especially in high volatility sectors. In this context, policy mechanisms are more important than the overall level of worker insurance.

Suggested Citation

  • Bozkaya, Ant & Kerr, William R., 2013. "Labor regulations and European venture capital," Bank of Finland Research Discussion Papers 30/2013, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2013_030
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    More about this item

    Keywords

    employment protection regulations; dismissal costs; unemployment insurance benefits; private equity; venture capital; entrepreneurship;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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