Firm-level employment, labour market reforms, and bank distress

Moritz Stieglitz and Ralph Setzer

Journal of International Money and Finance, 2022, vol. 120, issue C

Abstract: We explore the impact of financial frictions on the employment effect of labour market reforms. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of medium to long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation.

Keywords: Labour market reforms; Bank stress; Employment protection; Unemployment insurance (search for similar items in EconPapers)
JEL-codes: G21 J21 J60 K31 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Firm-level employment, labour market reforms, and bank distress (2019)
Working Paper: Firm-level employment, labour market reforms, and bank distress (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:120:y:2022:i:c:s0261560620302801

DOI: 10.1016/j.jimonfin.2020.102324

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