Job Creation

In this paper we model a job-specific shock process in the matching model of unemployment with non-cooperative wage behaviour. We obtain endogenous job creation and job destruction processes and study their properties. We show that an aggregate shock induces negative correlation between job creation and job destruction whereas a dispersion shock induces positive correlations. The job destruction process is shown to have more volatile dynamics than the job creation process. In simulations we show that an aggregate shock process proxies reasonably well the cyclical behaviour of job creation and job destruction in the United States.

Job Creation and Destruction is the culmination of a long, ongoing research program at the Center for Economic Studies. Using the most complete plant- level data source currently available--the Longitudinal Research Data constructed by the Census Bureau--it focuses on the U.S. manufacturing sector from 1972 to 1988 and develops a statistical portrait of the microeconomic adjustments to the many economic events that affect businesses and workers. The picture that emerges is one of large, persistent, and highly concentrated gross job flows, with job destruction dominating the cyclical feaures of net job flows. The authors describe in detail those characteristics that destroy and create jobs over time (including industry of origin, wage payments, international trade exposure, factor intensity, size, age, and productivity performance), while also providing a broader measure of the process that will be directly relevant to macroeconomists and policymakers.

The United States has long been viewed as having among the world’s most entrepreneurial, dynamic, and flexible economies. It is often argued that this dynamism and flexibility has enabled the US economy to adapt to changing economic circumstances and recover from recessions in a robust manner. While the evidence provides broad support for this view, the outcomes of entrepreneurship are more heterogeneous than commonly appreciated and appear to be evolving in ways that could raise concern. Evidence along a number of dimensions and a variety of sources points to a US economy that is becoming less dynamic. Of particular interest are declining business startup rates and the resulting diminished role for dynamic young businesses in the economy. We begin by describing how the concept of entrepreneurship is reflected in existing data on firm age and size. The recent addition of firm age to official statistics represents a dramatic improvement in the information available to entrepreneurship researchers. We then turn to a discussion of the role of startup firms in job creation. Business startups account for about 20 percent of US gross (total) job creation while high-growth businesses (which are disproportionately young)

This paper investigates the connection between the heterogeneity of establishment-level employment changes and aggregate fluctuations at business cycle frequencies. Our empirical work exploits a rich data set with approximately 860,000 annual observations and 3.4 million quarterly observations on 160,000 manufacturing establishments to calculate rates of gross job creation, gross job destruction, and their sum, gross job reallocation. Three central messages emerge from the research in this paper: First, establishment-level employment changes exhibit tremendous heterogeneity, even within narrowly defined sectors of the economy. This heterogeneity manifests itself in terms of high rates of gross job creation, destruction, and reallocation. Furthermore, the magnitude of this heterogeneity varies significantly over time; most of the variation is due to time variation in the idiosyncratic component of establishment growth rates, and the variation is significantly countercyclical. Second, our theoretical model of employment reallocation and business cycles is suggestive of how both aggregate and allocative disturbances can drive fluctuations in job creation, job destruction, unemployment, productivity, and output. Third, our empirical analysis of the joint dynamics of job creation and destruction supports the view that allocative disturbances were a major driving force behind movements in job creation, job destruction, job reallocation, and net employment growth in the U.S. manufacturing sector during the 1972 to 1986 period.

Does entry regulation hinder job creation? We investigate this question in the context of the French retail industry, a sector that has experienced especially low rates of job creation over the last 25 years. Since the early 70s, the French government has required regional zoning board approval for the creation or extension of any large retail store. Using a unique database that provides time and regional variation in boards' approval decisions, we show that this requirement created barriers to entry in the retail sector. We also show that these barriers to entry, either measured directly by approval rates or predicted by the political composition of the boards, weakened employment growth in the retail industry. Our findings indicate that retail employment could have been more than 10% higher today had entry regulation not been introduced. Promoting product market competition may thus be a key reform for countries with poor employment performance.

This paper investigates the contribution of small firms to employment, job creation, and growth in developing countries. While small firms (< 20 employees) have the smallest share of aggregate employment, the SME sector's (<100 employees) contribution is comparable to that of large firms. Small firms have the largest shares of job creation, and highest sales growth and employment growth, even after controlling for firm age. Large firms, however, have higher productivity growth. Conditional on size, young firms are the fastest growing and large mature firms have the largest employment shares but small young firms have higher job creation rates.

Van Stel A. J. and Storey D. J. (2004) The link between firm births and job creation: is there a Upas Tree effect?, Regional Studies38, 893-909. This paper examines the relationship between firm births and job creation in Great Britain. It uses a new data set for 60 British regions, covering the whole of Great Britain, between 1980 and 1998. For Great Britain as a whole, no significant relationship between start-ups and employment creation is found in the 1980s, but there is a negative relationship for the 'low enterprise' area of the North East of England. For the 1990s, a significant positive relationship for Great Britain as a whole is found, but for Scotland, which focused policy on start-ups, a negative relationship is found. The authors feel this raises questions over policies designed to raise rates of new firm formation as a strategy for employment creation, particularly in 'low enterprise' areas. Van Stel A. J. et Storey D. J. (2004) Le lien entre la création d'entreprise et la création d'emploi: l'effet Upas, existe-t'il?, Regional Studies38, 893-909. Cet article cherche à examiner le lien entre la création d'entreprise et la création d'emploi en Grande-Bretagne. On emploie un nouvel ensemble de données portant sur la période de 1988 à 1998 et pour 60 zones britanniques couvrant toute la Grande-Bretagne. Pour la Grande-Bretagne dans son ensemble, il ne s'avère aucun lien important entre la création d'entreprise et la création d'emploi dans les années 1980, mais un lien négatif pour ce qui est de la zone dite 'à faible entreprise', à savoir le nord-est d'Angleterre. Pour les années 1990, il s'avère un lien positif important pour la Grande-Bretagne dans son ensemble, à la différence de l'Ecosse où la politique a porté sur la création d'entreprise et qui fait preuve d'un lien négatif. Par la suite, des questions se posent sur les politiques qui cherchent à augmenter le taux de création d'entreprise dans le but de créer des emplois, surtout dans les zones dites à 'faible entreprise'. Van Stel A. J. und Storey D. J. (2004) Die Verknüpfung von Firmengründung und Arbeitsbeschaffung: Gibt es einen Upasbaumeffekt?, Regional Studies 38, 893-909. Dieser Aufsatz untersucht die Beziehung zwischen Firmengründung und Arbeitsbeschaffung in Großbritannien. Dazu werden neue Datenreihen für 60 britische Regionen benutzt, die ganz Großbritannien im Zeitraum 1980-98 erfassen. Für Großbritannien als Ganzes ergab sich während der achtziger Jahre keine signifikante Beziehung zwischen Firmengründung und Arbeitsbeschaffung, doch eine negative in den 'unternehmensschwachen' Gebieten Nordostenglands. Für die neunziger Jahre wird für Großbritannien insgesamt ein signifkant positives Verhältnis festgestellt, aber ein negatives in Schottland, das seine Bestrebungen auf Firmengründungen konzentrierte. Dies wirft Fragen betreff Bestrebungen auf, die speziell auf Anhebung von Firmengründungen als Strategie zur Beschaffung von Arbeitsplätzen abzielten, besonders in 'unternehmensschwachen' Gebieten. Van Stel A. J. y Storey D. J. (2004) El vínculo entre los nacimientos de empresas y la creación de empleo: existe un efecto Upas Tree?, Regional Studies38, 893-909. Este artículo examina la relación entre los nacimientos de empresas y la creación de empleo en Gran Bretaña. Utilizamos una nueva base de datos para 60 regiones británicas, cubriendo Gran Bretaña en su totalidad, entre 1980 y 1998. Para Gran Bretaña en su totalidad no encontramos ninguna relación significativa entre las nuevas empresas y la creación de empleo en los años 80, pero sí encontramos una relación negativa para la zona de 'baja actividad emprendedora' del Noreste de Inglaterra. Para los años 90 encontramos una relación positiva significativa para Gran Bretaña en su totalidad, sin embargo, para Escocia, que concentró sus políticas en la creación de empresas, encontramos una relación negativa. Creemos que esto plantea cuestiones sobre políticas diseñadas a aumentar los índices de formación de nuevas empresas como estrategia de creación de empleo, particularmente en zonas de 'baja actividad emprendedora'.

We document a negative correlation, at business cycle frequencies, between the net job creation rate of large employers and the level of aggregate unemployment that is much stronger than for small employers. The differential growth rate of employment between initially large and small employers has an unconditional correlation of -0.5 with the unemployment rate, and varies by about 5 percent over the business cycle. We exploit several datasets from the United States, Denmark, and France, both repeated cross sections and job flows with employer longitudinal information, spanning the last four decades and several business cycles. We discuss implications for theories of factor demand. (JEL D22, E23, E32, J23, L25)

SMEs have historically played an important role in contributing to economic development of many countries around the world. Naturally all businesses start as small businesses or even start out of small businesses initiated by individuals. Evidence from this study shows that SMEs represent vast portion of businesses in developing countries including South Africa. In South Africa, SMEs account for about 91% of the formal business entities, contributing to about 51 and 57% of GDP, providing almost 60% of employment. The main challenges affecting SMEs in South Africa include lack of management skills, finance, access to bank credit, access to markets, appropriate technology, low production capacity, recognition by big companies, lack of interest, long bureaucracy processes, and support for the roles that small businesses can play in economic development. This study re-assesses the role of SMEs in creating jobs, boost, enhance and support economic development in South Africa.   Key words: Small business, entrepreneurship, job creation, job shedding, economic development, poverty alleviation.

This paper reports new and unique firm level survey evidence to investigate the micro economic nature of the growth process and structural change in three transition countries, Romania, Bulgaria and Hungary. In particular we investigate gross job creation and destruction in newly established private (de novo) firms and "traditional" ones, being state owned and privatized firms and find that the de novo private firms are the most dynamic ones in terms of job creation. In addition, we find that job reallocation in the early years of transition occurs predominantly between sectors, while later on in the transition more within sector job reallocation is observed. After controlling for size and life cycle effects we find that de novo private firms consistently outperform the state owned and privatized enterprises. In addition, we find that state owned enterprises are not significantly different in their employment behavior from privatized firms. We find mixed effects of competition on employment growth. They vary according to sector and country. Finally, we find evidence that suggests efficiency wage payments are important for employment growth in Hungary, but not in Romania and Bulgaria.