Discussion paper

DP4172 Reducing Start-Up Costs for New Firms: The Double Dividend on the Labour Market

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.

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Citation

Winter-Ebmer, R, U Dulleck and P Frijters (2004), ‘DP4172 Reducing Start-Up Costs for New Firms: The Double Dividend on the Labour Market‘, CEPR Discussion Paper No. 4172. CEPR Press, Paris & London. https://cepr.org/publications/dp4172