Centre for Finance, Credit and Macroeconomics (CFCM)
   
   
  

CFCM 18/06: Labour responses, regulation and business churn in a small open economy

Abstract

We analyze labour responses to technology shocks when firm entry is sluggish due to endogenous sunk costs. We provide closed-form solutions for transition dynamics that show, when firm entry is slow to respond, labour will increase (decrease) relative to its long-run response if returns to labour input at the firm level are increasing (decreasing).  Under stricter regulation (slower business churn), such short-run deviations of labour persist for longer. There is also potential for short-run productivity effects to differ from the long run.

Download the PDF of this paper

Authors

Marta Aloi, Huw Dixon and Anthony Savagar


View all CFCM discussion papers | View all School of Economics featured discussion papers

 

Posted on Thursday 22nd March 2018

Centre for Finance, Credit and Macroeconomics

Sir Clive Granger Building
University of Nottingham
University Park
Nottingham, NG7 2RD

+44 (0)115 951 5620