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Abstract:

cover
CEP Discussion Paper
Company Start-Up Costs and Employment
Christopher A. Pissarides
March 2002
Paper No' CEPDP0520:
Full Paper (pdf)

Tags: start-up costs; regulation; employment; oecd unemployment; search and matching.

I study the role of company start-up costs for employment performance. The model is search equilibrium with a new concept for firms. Agents have an innate managerial ability and make a career choice to become either managers or workers. Managers set up firms, post jobs and match with workers. Managers set up firms, post jobs and match with workers. I show that in equilibrium, career choice and job creation are jointly determined. Higher start-up costs reduce overall employment but increase the size of incumbent firms. I discuss some cross-country OECD evidence which supports the model's main proposition.