Age or Size? Determinants of Job Creation
AbstractSmall firms have often been identified as drivers of job creation, although the evidence on their contribution to net employment growth has been disputed. This paper shows that job turnover and firm growth vary systematically across firm size groups and that smaller firms do indeed make an important contribution to new job creation. There is a significant caveat, however; we find that it is not firm size per se that is driving these results but rather firm age. The considerable overlap between the two properties, as young firms overwhelmingly tend to be small, has perhaps led to much of the effect of firm age being misattributed to size. We show that younger firms are consistently more dynamic than older firms and this holds across all size classes, not just amongst smaller firms. In addition, a relationship between lagged employment and firm growth is found to exist only for young firms.
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Bibliographic InfoPaper provided by Central Bank of Ireland in its series Research Technical Papers with number 02/RT/13.
Date of creation: Apr 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-05 (All new papers)
- NEP-CSE-2013-07-05 (Economics of Strategic Management)
- NEP-ENT-2013-07-05 (Entrepreneurship)
- NEP-LAB-2013-07-05 (Labour Economics)
- NEP-LMA-2013-07-05 (Labor Markets - Supply, Demand, & Wages)
- NEP-SBM-2013-07-05 (Small Business Management)
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