English, Article, Journal or magazine article edition: Job Creation and Investment in Imperfect Capital and Labor Markets Sílvio Rendon

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Bookmark: http://trove.nla.gov.au/version/160250
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Job Creation and Investment in Imperfect Capital and Labor Markets
Author
  • Sílvio Rendon
Physical Description
  • preprint
Notes
  • This paper shows that liquidity constraints restrict job creation even with flexible labor markets. In a dynamic model of firm investment and demand for labor with imperfect capital markets, represented as a constraint on dividends, and imperfect labor markets, contained in legal firing and hiring costs applicable to some workers, firms use flexible labor contracts to alleviate financial constraints. The optimal policy rules of the theoretical model are integrated into a maximum likelihood procedure to recover the model's behavioral parameters. Data for the estimation come from the CBBE (Balance Sheet data from the Bank of Spain). I evaluate the effects of removing one imperfection at a time, and show that the relaxation of financial constraints produces (i) more job creation than the elimination of labor market rigidities, and (ii) a substantial increase in firm investment, which does not happen if only labor market rigidities are removed.
  • Job Creation, Employment, Investment, Adjustment Costs, Liquidity Constraints, Structural Estimation.
  • RePEc:cea:doctra:e2004_35
Language
  • English
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