EconPapers    
Economics at your fingertips  
 

Employment and firm heterogeneity, capital allocation, and countercyclical labor market policies

Brendan Epstein () and Alan Finkelstein Shapiro ()

Journal of Development Economics, 2017, vol. 127, issue C, 25-41

Abstract: Developing and emerging economies have large employment shares in micro and small firms, which are characterized by limited access to formal financing and high reliance on input credit. These economies implemented a host of countercyclical labor market policies amid the Global Financial Crisis (GFC), but labor market data limitations prevent detailed empirical assessments of the effectiveness of these policies. We develop a business cycle model with frictional labor markets consistent with the employment and firm structure of these economies and assess the aggregate impact of key countercyclical labor market policies implemented amid the GFC. Improving job intermediation for large firms is particularly effective in aiding recoveries. Policies targeting smaller firms yield limited aggregate benefits. Differences in labor productivity and sectoral contribution to employment and output across firm categories are key in explaining the response to policy.

Keywords: Business cycles; Search frictions; Fiscal policy; Self-employment; Small firms; Input credit (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304387817300160
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Employment and Firm Heterogeneity, Capital Allocation, and Countercyclical Labor Market Policies (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:127:y:2017:i:c:p:25-41

DOI: 10.1016/j.jdeveco.2017.02.006

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-04-08
Handle: RePEc:eee:deveco:v:127:y:2017:i:c:p:25-41