Labor Regulations and European Venture Capital

Journal of Economics and Management Strategy Volume 23, Issue 4, 1 December 2014: 776-810

Bank of Finland Research Discussion Paper No. 30/2013

54 Pages Posted: 19 Dec 2013 Last revised: 5 Mar 2015

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 11, 2013

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 market insurance mechanisms. Venture capital investors are especially sensitive to these labor adjustment costs. Nations favoring labor market expenditures as the mechanism for providing worker insurance developed stronger venture capital markets over 1990-2008, especially in high volatility sectors. In this context, policy mechanisms are more important than the overall level of worker insurance.

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

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

Suggested Citation

Bozkaya, Ant and Kerr, William R., Labor Regulations and European Venture Capital (December 11, 2013). Journal of Economics and Management Strategy Volume 23, Issue 4, 1 December 2014: 776-810 ; Bank of Finland Research Discussion Paper No. 30/2013. Available at SSRN: https://ssrn.com/abstract=2369281 or http://dx.doi.org/10.2139/ssrn.2369281

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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