TY  - RPRT
        AU  - Felbermayr, Gabriel
AU  - Prat, Julien
        TI  - Product Market Regulation, Firm Selection and Unemployment
        PY  - 2007/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2754
        UR  - https://www.iza.org/index.php/publications/dp2754
        AB  - This paper analyzes the effect of Product Market Regulation (PMR) on unemployment in a search model with heterogeneous multiple-worker firms. In our setup, PMR modifies the distribution of firm productivities, thereby affecting the equilibrium rate of unemployment. We distinguish between PMR related to entry costs and PMR that generates recurrent fixed costs. We find that: (i) higher entry costs raise the rate of unemployment mainly through our novel selection effect, (ii) higher fixed costs lower unemployment through the selection effect and increase it through the competition effect analyzed in Blanchard and Giavazzi (2003). We propose econometric evidence consistent with the unemployment effects of sunk versus recurring costs.
        KW  - search model
KW  - unemployment
KW  - product market regulation
KW  - firms heterogeneity
        ER  -