Entrepreneurship and Labour Market Institutions
Year: 2005
Type: article
Abstract: In this paper, we extend the theory of entrepreneurship to incorporate the effects of labour market institutions. Enterprise formation, wage determination, and optimal firm size are examined in an occupational choice model under two alternative wage-formation mechanisms. Our benchmark case with competitive labour markets shows that the entrepreneurship, firm size and the wage rate are all determined by the underlying technology. With union power in wage setting, standard results hold: firm size and the wage rate also depend on the relative bargaining power and unemployment compensation. There is a further implication: our main result indicates that, in the union model, the equilibrium rate of entrepreneurship decreases in the union's strength in wage setting. JEL Classification: J23, J24, J51, M13
Source: Työväentutkimus Vuosikirja
Authors: Vesa Kanniainen, Mikko Leppämäki
Language: English
Subfield: Management of Technology and Innovation
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2192124204