Labor Regulations and European Private Equity

38 Pages Posted: 23 Dec 2009

See all articles by Ant Bozkaya

Ant Bozkaya

MIT Sloan ; National Bureau of Economic Research; Harvard Business School

William Kerr

Harvard University - Entrepreneurial Management Unit

Date Written: December 22, 2009

Abstract

European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor insurance mechanisms. Venture capital and private equity investors are especially sensitive to these labor adjustment costs. Nations favoring labor expenditures as the mechanism for providing worker insurance developed stronger private equity markets in high volatility sectors over 1990-2004. These patterns are further evident in US investments into Europe. In this context, policy mechanisms are more important than the overall insurance level provided.

Keywords: employment protection regulations, dismissal costs, unemployment insurance benefits, private equity, venture capital, buy-outs, entrepreneurship

JEL Classification: G24, J21, J65, L26, M13, O31, O32, O52

Suggested Citation

Bozkaya, Ant and Kerr, William R., Labor Regulations and European Private Equity (December 22, 2009). Harvard Business School Entrepreneurial Management Working Paper No. 08-043; MIT Sloan Research Paper No. 4771-10. Available at SSRN: https://ssrn.com/abstract=1527168 or http://dx.doi.org/10.2139/ssrn.1527168

Ant Bozkaya

MIT Sloan ( email )

Global Economics and Management
50 Memorial Drive
Cambridge, MA 02142
United States

HOME PAGE: http://www.bozkaya.org

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.bozkaya.org

Harvard Business School ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

HOME PAGE: http://www.bozkaya.org

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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