Job creation under liquidity constraints: The Spanish case

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Rendón, Silvio. Job creation under liquidity constraints: The Spanish case. 2000
To cite or link this document: Rendón, Silvio
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa 2000-07-01
dc.description.abstract This paper shows that liquidity constraints restrict job creation even when labor markets are flexible. In a dynamic model of labor demand, I show that in an environment of imperfect capital and imperfect labor markets, firms use temporary contracts to relax financial constraints. Evidence for the predictions of the model is presented using Spanish data from the CBBE (Central de Balances del Banco de Espa?a - Balance Sheet data from the Bank of Spain). It is shown that firms substitute temporary labor for permanent one and use less debt as their financial position improves. In particular, it is rejected that Spanish firms operate in an environment of free capital markets and of no labor adjustment costs. The labor reform of 1984, which created temporary contracts, implied to some extent a relaxation of liquidity constraints. Accordingly, firms used these contracts more extensively and used less debt; however, as capital markets continue to be imperfect, permanent job creation continues to be slow. Consequently, relaxation of liquidity constraints should also be part of a job creation strategy.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 488
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.title Job creation under liquidity constraints: The Spanish case
dc.type info:eu-repo/semantics/workingPaper 2016-06-04T02:50:31Z
dc.subject.keyword Labour, Public, Development and Health Economics
dc.subject.keyword job creation
dc.subject.keyword employment
dc.subject.keyword investment
dc.subject.keyword adjustment costs
dc.subject.keyword liquidity constraints
dc.rights.accessRights info:eu-repo/semantics/openAccess

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