Profit-seeking is a key driver of new business creation, which, in turn, significantly influences unemployment dynamics. This paper uses US data to estimate the joint responses of firm entry, profits, unemployment, hours worked, and other aggregates to commonly studied supply shocks. Our analysis finds a positive correlation between firm entry, profits, and total hours worked, alongside a negative correlation with the unemployment rate. We develop and estimate a general equilibrium model that captures these dynamics.
Colciago, A., Fasani, S., Rossi, L. (2025). Firm Entry, Endogenous Wage Moderation, and Labor Market Dynamics. EUROPEAN ECONOMIC REVIEW, 172(February 2025) [10.1016/j.euroecorev.2024.104939].
Firm Entry, Endogenous Wage Moderation, and Labor Market Dynamics
Colciago A
;
2025
Abstract
Profit-seeking is a key driver of new business creation, which, in turn, significantly influences unemployment dynamics. This paper uses US data to estimate the joint responses of firm entry, profits, unemployment, hours worked, and other aggregates to commonly studied supply shocks. Our analysis finds a positive correlation between firm entry, profits, and total hours worked, alongside a negative correlation with the unemployment rate. We develop and estimate a general equilibrium model that captures these dynamics.
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