We quantify the role of financial factors that have contributed to sluggish investment in Europe in the aftermath of the 2008-2009 crisis. Using a big data approach, we match the firms to their banks based on banking relationships in 8 European countries over time, obtaining over 2 million...

European nations substitute between employment protection regulations and labor market expenditures (e.g., unemployment insurance benefits) for providing worker insurance. Employment regulations more directly tax firms making frequent labor adjustments than other labor insurance mechanisms....