presse@iwh-halle.de
Pills or puts?
Shuo Xia
Financial Times, February 2, 2024
We offer new evidence on the real effects of credit shocks in the presence of employment protection regulations by exploiting a unique provision in Spanish labor laws: dismissal rules are less stringent for Spanish firms with fewer than 50 employees, lowering the cost of hiring new workers.
Focusing on both micro and aggregate U.S. data, we document the existence of a significant link between aggregate uncertainty, capital market valuations and reallocation of resources away from risky R&D-intensive capital.