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Financial Fragility, Business Creation and Job Destruction*

Published online by Cambridge University Press:  17 August 2016

Étienne Wasmer  and
Philippe Weil
Étienne Wasmer
Affiliation:
Université de Metz, ID2, ECARES, IZA and CEPR
Philippe Weil
Affiliation:
ECARES, VLB, IEP Paris, CEPR and NBER
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Summary

We build a model of endogenous destruction with credit and labor market imperfections, represented by a matching process between financiers and entrepreneurs on one hand, and entrepreneurs and workers on the other hand. Business creation, credit opening and job destruction represent three active margins of the model. Financial imperfections lead to financial fragility. This implies the existence of a forth latent margin which may be activated in the case of repudiation of financial contracts. This paradigm is applied to the recent development of the U.S. economy. An empirical test in panel of OECD countries further suggests the importance of venture capital for macroeconomic variables.

Résumé

Résumé

Nous construisons un modèle de destruction endogènes d’emploi avec des imperfections sur le marché du crédit et du travail. Ces imperfections sont représentées par un processus d’appariement entre les banquiers et les entrepreneurs d’une part, et entre les entrepreneurs et les salariés d’autre part. La création d’entreprises, l’ouverture des crédits aux entreprises et la destruction des emplois constituent les trois marges actives du modèle. Les imperfections financières créent de la fragilité financière, ce qui implique l’existence d’une quatrième marge à l’état de latence. Cette marge peut être activée lorsque les contrats financiers sont répudiés. Ce paradigme est appliqué aux dévelopements récents de l’économie américaine. Un test sur données de panel de l’OCDE suggère l’importance du capital-risque pour les variables macro-économiques.

Keywords

Credit and Search FrictionsUnemploymentNew EconomyMonetary PolicyJ64G24E51Frictions de Credit et de ProspectionChômageNouvelle EconomicJ64G24E51
Type
III. Finance
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 68 , Special Issue 1-2: The New Economy: Implications and Viability , 2002 , pp. 185 - 202
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2002 

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Footnotes

*

This paper was prepared for the conference “New Economy, Viability and Implications”, Université de Metz, on April 27-28,2001. We thank the participants for their comments. We also thank Asa Rosen for her careful reading of the paper.

References

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