Publication

This paper analyzes whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful in producing employment growth and in reducing unemployment than most continental-European OECD-countries during the period 1980 to 2000. The authors argue that the often-blamed labor market rigidities alone, while important, do not provide a satisfactory explanation for these differences across countries and over time. They state that financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the "new economy." The authors suggest that highly developed venture capital markets should help to alleviate such financial constraints.