Financial Fragility, Business Creation and Job Destruction

Etienne Wasmer and Philippe Weil

No 2002026, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We build a model of endogenous destruction with credit and labor market imperfections, represented by a matching process between financiers and entrepreneurs on one hand, and entrepreneurs and workers on the other hand. Business creation, credit opening and job destruction represent three active margins of the model. Financial imperfections lead to financial fragility. This implies the existence of a forth latent margin which may be activated in the case of repudiation of financial contracts. This paradigm is applied to the recent development of the U.S. economy. An empirical test in panel of OECD countries further suggests the importance of venture capital for macroeconomic variables.

Keywords: Credit and Search Frictions; Unemployment; New Economy; Monetary Policy (search for similar items in EconPapers)
JEL-codes: E51 G24 J64 (search for similar items in EconPapers)
Pages: 18
Date: 2002-06-01
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Related works:
Journal Article: Financial Fragility, Business Creation and Job Destruction* (2002)
Working Paper: Financial Fragility, Business Creation and Job Destruction (2002)
Working Paper: Financial Fragility, Business Creation and Job Destruction (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvre:2002026

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