Company Start-Up Costs and Employment

Christopher Pissarides

CEP Discussion Papers from Centre for Economic Performance, LSE

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. Managers set up firms, post jobs and match with workers. Managers 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.

Keywords: Start-up costs; regulation; employment; OECD unemployment; search and matching. (search for similar items in EconPapers)
Date: 2002-03
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Citations: View citations in EconPapers (17)

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Working Paper: Company start-up costs and employment (2002)
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