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Company start-up costs and employment

Authors
Publisher
Centre for Economic Performance, London School of Economics and Political Science
Publication Date
Keywords
  • Hd Industries. Land Use. Labor
Disciplines
  • Economics

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. Manage rs 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.

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