Venture capital investment and labor market performance : a panel data analysis
Ansgar Belke; Rainer Fehn; Neil Foster
Labour market performance has differed considerably between OECD countries over the last two decades. The focus of the literature so far has been to ask whether these differences can be explained by varying degrees of labour market rigidities and generosity of wellfare states. This paper takes a different perspective and analyzes whether differences in venture capital investments have explanatory power with respect to labour market performance across countries and over time. In particular, the Anglo-Saxon countries have been relatively succesful over last two decades in producing employment growth and in reducing unemployment compared to most continental European OECD countries. As a rule they have also been and are still ahead in developing thriving venture capital markets that are often deemed crucial for the creation of new firms and for successfully managing the ongoing racial structural change away from traditional industrial production toward the so-called "new economy".