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Title:Firms and flexibility PDF Logo
Authors:Hobijn, Bart
Sahin, Aysegül
Issue Date:2007
Series/Report no.:Staff Report, Federal Reserve Bank of New York 311
Abstract:We study the effects of labor market rigidities and frictions on firm-size distributions and dynamics. We introduce a model of endogenous entrepreneurship, labor market frictions, and firm-size dynamics with many types of rigidities, such as hiring and firing costs, search frictions with vacancy costs, unemployment benefits, firm entry costs, and a tax wedge between wages and labor costs. We use the model to analyze how each rigidity explains firm-size differentials between the United States and France. We find that when we include all rigidities and frictions except hiring costs and search frictions, the model accounts for much of the firm-size differentials between the United States and France. The addition of search frictions with vacancy costs generates implausibly large differentials in firm-size distributions.
Subjects:Labor market
Corporations - Finance
Business enterprises - Finance
Employment
Unemployment
JEL:C78
D21
E24
J6
L26
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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