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Labor responses, regulation and business churn

Aloi, Marta, Dixon, Huw and Savagar, Anthony 2021. Labor responses, regulation and business churn. Journal of Money, Credit and Banking 53 (1) , pp. 119-156. 10.1111/jmcb.12694

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We develop a model of sluggish firm entry to explain short-run labor responses to technology shocks. We show that the labor response to technology and its persistence depend on the degree of returns to labor and the rate of firm entry. Existing empirical results support our theory based on short-run labor responses across US industries. We derive closed-form transition paths that show the result occurs because labor adjusts instantaneously whilst firms are sluggish, and closed-form eigenvalues show that stricter entry regulation results in slower convergence to steady state.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Wiley
ISSN: 0022-2879
Date of First Compliant Deposit: 29 August 2019
Date of Acceptance: 27 August 2019
Last Modified: 17 Jul 2022 05:24

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