DP4172 Reducing Start-Up Costs for New Firms: The Double Dividend on the Labour Market
|Author(s):||Uwe Dulleck, Paul Frijters, Rudolf Winter-Ebmer|
|Publication Date:||January 2004|
|Keyword(s):||education, matching, start-up costs, venture capital|
|JEL(s):||D73, J24, J68|
|Programme Areas:||Labour Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4172|
Starting a firm with expansive potential is an option for educated and high-skilled workers. This option serves as an insurance against unemployment caused by labour market frictions and hence increases the incentives for education. We show within a matching model that reducing the start-up costs for new firms results in higher take-up rates of education. It also leads, through a thick-market externality, to higher rates of job creation for high-skilled labour as well as average match productivity. We provide empirical evidence to support our argument.