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

Ralph Setzer and Moritz Stieglitz

No 15/2019, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: We explore the interaction between labour market reforms and financial frictions. 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 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 J80 K31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-ias and nep-lma
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:152019

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