Capital market imperfections, greater volatilities, and rising unemployment: does venture capital help?

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Institutions and Structural Unemployment: Do Capital Market Imperfections Matter? CEPS Working Document No. 158, November 2000

This paper analyses whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unemployment than most continental-European OECD-countries. It is argued that the often-blamed labour market rigidities alone, while important, do not provide a satisfactory explanation for these differences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the “new economy”. Highly developed venture capital markets should help to alleviate such financial constraints. This view that labour-market institutions should be supplemented by capital market imperfections for explaining differences in employment performances is supported by our panel data analysis, in which venture capital turns out to be a significant institutional variable

Unemployment in Germany: Reasons and Remedies

This paper discusses the reasons for the dismal labor market performance of Germany over the last three decades along with potential remedies. It argues that labor market rigidities along with a generous welfare state in conjunction with certain changes in the economic environment are important in explaining this development but cannot solely account for it. Barriers to entrepreneurship, to setting up new firms and to innovations which are prevalent on goods and capital markets also play an important role in explaining the lackluster German economic performance of which rising unemployment is only one part. Comprehensive institutional reforms are therefore called for.unemployment, Germany, labor market reforms, venture capital, innovations

Capital Market Institutions and Venture Capital: Do They Affect Unemployment and Labour Demand?

This paper analyses the influence of the capital market on the labour market. Especially the impact of start-up financing on the structure of unemployment is of interest. We use a cross-country panel data analysis to examine how venture capital investment influences disaggre-gate unemployment. As we expected, venture capital investment has different influences on sectoral-, educational- and occupational-specific unemployment. We suggest, on the basis of the regression results that venture capital investment is a catalyst of structural change and has contributed to the faster growing internet and new economy sector in countries like the U.S. that have a well-developed venture capital market.Labor markets, venture capital, employment, new economy, panel analysis

Institutions and structural unemployment: do capital-market imperfections matter?

This paper analyzes whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unemployment than most continental-European OECD-countries. It is argued that the often-blamed labor-market rigidities alone, while important, do not provide a satisfactory explanation for these differences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the new economy. Highly developed venture capital markets should help to alleviate such financial constraints. This view that labor-market institutions should be supplemented by capitalmarket imperfections for explaining differences in employment performances is supported by our panel data analysis, in which venture capital turns out to be a significant institutional variable. --labor markets,unemployment,new economy,panel analysis,venture capital

Unemployment in Germany: reasons and remedies

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Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter?

This paper analyzes whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unemployment than most continental-European OECD-countries. It is argued that the often-blamed labor market rigidities alone, while important, do not provide a satisfactory explanation for these differences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the “new economy”. Highly developed venture capital markets should help to alleviate such financial constraints. This view that labor-market institutions should be supplemented by capital market imperfections for explaining differences in employment performances is supported by our panel data analysis, in which venture capital turns out to be a significant institutional variable.Labor markets, unemployment, new economy, panel analysis, venture capital

Labor market policy in the new economy

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