 Product market regulation, Firm Selection, and UnemploymentGabriel Felbermayr and Julien Prat Munich Reprints in Economics from University of Munich, Department of Economics Abstract: This paper analyzes the effect of product market regulation (PMR) on unemployment in a search model with heterogeneous multiple-worker firms. In our setup, PMR modifies the distribution of firm productivities, thereby affecting the equilibrium rate of unemployment. We distinguish between PMR related to entry costs and PMR that generates recurrent fixed costs. We find that: (i) higher entry costs raise the rate of unemployment mainly through our novel selection effect, (ii) higher fixed costs decrease unemployment through the selection effect and increase it through the competition effect analyzed in Blanchard and Giavazzi (2003, Quarterly Journal of Economics, 118, 879-907). Firm heterogeneity magnifies the impact of both types of regulatory costs. We propose econometric evidence consistent with the unemployment effects of sunk versus recurring costs. Date: 2011 Published in Journal of the European Economic Association 2 9(2011): pp. 278-317 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20593 Access Statistics for this paper More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC. |
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