CIAO DATE: 05/04

Does venture capital investment spur employment growth?

Abstract

In spite of the recent cyclical downturn, there is a growing sense that the United States has been steaming ahead again in terms of economic development compared to most OECD countries but especially compared to Germany and Japan, which not long ago, namely in the 1980s, were considered to be successful economic role models. The catch-up process of these two countries vis-â-vis the US does not only seem to be have stopped, but the gap appears to have begun to widen again. This is largely the result of a poor economic performance in the 1990s, especially in Japan, but also in reunified Germany with considerably lower growth rates of per capita GDP and of total factor productivity and a far less impressive labour market performance featuring lower and at times even negative employment growth and rising instead of falling NAIRUs. The US appears to be better able to cope with the economic challenges posed to OECD countries in recent years which can be traced back inter alia to globalisation and to labour-saving technical progress.

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