Working Paper: CEPR ID: DP4172
Authors: Uwe Dulleck; Paul Frijters; Rudolf Winterebmer
Abstract: Starting a firm with expansive potential is an option for educated and high-skilled workers. This option serves as an insurance against unemployment caused by labour market frictions and hence increases the incentives for education. We show within a matching model that reducing the start-up costs for new firms results in higher take-up rates of education. It also leads, through a thick-market externality, to higher rates of job creation for high-skilled labour as well as average match productivity. We provide empirical evidence to support our argument.
Keywords: education; matching; startup costs; venture capital
JEL Codes: D73; J24; J68
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reducing startup costs (M13) | higher education rates (I23) |
| higher education rates (I23) | increased job creation for high-skilled labor (J68) |
| reducing startup costs (M13) | increased job creation for high-skilled labor (J68) |
| lower startup costs (M13) | increased education (I24) |
| lower startup costs (M13) | increased job creation for high-skilled labor (J68) |