Land Collateral and Labor Market Dynamics in France
CESifo, Munich, 2014
CESifo Working Paper No. 4978
![](https://cesifo.org/DocImg/cesifo1_wp4978.jpg?c=1689237048)
The value of land in the balance sheet of French firms correlates positively with their hiring and investment flows. To explore the relationship between these variables, we develop a macroeconomic model with firms that are subject to both credit and labor market frictions. The value of collateral is driven by the forward-looking dynamics of the land price, which reacts endogenously to fundamental and non-fundamental (sunspot) shocks. We calibrate the model to French data and find that land price shocks give rise to significant amplification and hump-shaped responses of investment, vacancies and unemployment that are in line with the data.
Fiscal Policy, Macroeconomics and Growth
Labour Markets