This paper shows that labor market institutions are important for the formation of new enterprises. The effects of labor market institutions on entrepreneurship, wage determination, and firm size are analysed analytically and illustrated numerically. The main result is that an increase in union...

This paper models the distribution of firm sizes as the market equilibrium from occupational choices made by rational individuals with different entrepreneurial skills. The model is calibrated to match Spanish data on the size of occupational groups (employees, employers, solo self-employed) and...