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Labor Responses, Regulation and Business Churn

Marta Aloi (), Huw D. Dixon and Anthony Savagar

No 7275, CESifo Working Paper Series from CESifo Group Munich

Abstract: We develop a model of sluggish firm entry to explain short-run labor responses to technology shocks. We show that the labor response to technology and its persistence depend on the degree of returns to labor and the rate of firm entry. Existing empirical results support our theory based on short-run labor responses across US industries. We derive closed-form transition paths that show the result occurs because labor adjusts instantaneously whilst firms are sluggish, and closed-form eigenvalues show that stricter entry regulation results in slower convergence to steady state.

Keywords: deregulation; dynamic entry; endogenous entry costs (search for similar items in EconPapers)
JEL-codes: D25 E20 L11 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

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Related works:
Working Paper: Labour responses, regulation and business churn in a small open economy (2018) Downloads
Working Paper: Labor Responses, Regulation and Business Churn in a Small Open Economy (2018) Downloads
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