Firm-Level Employment, Labour Market Reforms, and Bank Distress

62 Pages Posted: 2 Dec 2019

See all articles by Moritz Stieglitz

Moritz Stieglitz

Halle Institute for Economic Research

Ralph Setzer

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: December, 2019

Abstract

We explore the interaction between labour market reforms and financial frictions. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation.

Keywords: bank stress, employment protection, structural reforms, unemployment insurance

JEL Classification: G21, J21, J60, K31

Suggested Citation

Stieglitz, Moritz and Setzer, Ralph, Firm-Level Employment, Labour Market Reforms, and Bank Distress (December, 2019). ECB Working Paper No. 2334. Available at SSRN: https://ssrn.com/abstract=3496669

Moritz Stieglitz

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Ralph Setzer (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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