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Entrepreneurship, job Creation, and Wage Growth

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Author Info

  • Malchow-Møller, Nikolaj

    (Department of Economics, Copenhagen Business School)

  • Schjerning, Bertel

    (Department of Economics, Copenhagen Business School)

  • Sørensen, Anders

    (Department of Economics, Copenhagen Business School)

Abstract

This paper analyses the importance of entrepreneurs for job creation and wage growth. Relying on unique data that covers all plants, firms and individuals in the Danish private sector, we are able to distil a number of different measures of entrepreneurial plants from the set of new plants, including measures that much more precisely capture the "truly new” or "entrepreneurial” plants than in previous studies. Using these data, we find that while new plants in general account for one third of the gross job creation in the economy, entrepreneurial plants are responsible for between 15% and 25% of this, and thus only account for up to 8% of total gross job creation in the economy. However, entrepreneurial plants seem to generate more additional jobs than other new plants in the years following entry. Finally, the jobs generated by entrepreneurial plants are to a large extent low-wage jobs, as they are not found to contribute to the growth in average wages. However, this insight varies across the different types of entrepreneurial plants.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7713
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Bibliographic Info

Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 13-2008.

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Length: 20 pages
Date of creation: 01 Jan 2008
Date of revision:
Handle: RePEc:hhs:cbsnow:2008_013

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Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
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Web page: http://www.cbs.dk/departments/econ/
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References

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  1. Michael Fritsch & Pamela Mueller, 2008. "The effect of new business formation on regional development over time: the case of Germany," Small Business Economics, Springer, vol. 30(1), pages 15-29, January.
  2. Parker,Simon C., 2004. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521828130, December.
  3. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  4. Schnabel, Claus & Kohaut, Susanne & Brixy, Udo, 2004. "Do newly founded firms pay lower wages? First evidence from Germany," Discussion Papers 28, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  5. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
  6. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  7. Steven J. Davis & John Haltiwanger & Scott Schuh, 1993. "Small Business and Job Creation: Dissecting the Myth and Reassessing theFacts," NBER Working Papers 4492, National Bureau of Economic Research, Inc.
  8. André van Stel & Kashifa Suddle, 2006. "The Impact of New Firm Formation on Regional Development in the Netherlands," Scales Research Reports H200604, EIM Business and Policy Research.
  9. Spletzer, James R, 2000. "The Contribution of Establishment Births and Deaths to Employment Growth," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 113-26, January.
  10. David Neumark & Brandon Wall & Junfu Zhang, 2008. "Do Small Businesses Create More Jobs? New Evidence from the National Establishment Time Series," NBER Working Papers 13818, National Bureau of Economic Research, Inc.
  11. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
  12. David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 113-124.
  13. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  14. Adriaan Van Stel & David Storey, 2004. "The Link between Firm Births and Job Creation: Is there a Upas Tree Effect?," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 893-909.
  15. Charles Brown & James L. Medoff, 2001. "Firm Age and Wages," NBER Working Papers 8552, National Bureau of Economic Research, Inc.
  16. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, January.
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Cited by:
  1. Philipp D. Koellinger & A. Roy Thurik, 2012. "Entrepreneurship and the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1143-1156, November.
  2. Rotger, Gabriel Pons & Gørtz, Mette & Storey, David J., 2012. "Assessing the effectiveness of guided preparation for new venture creation and performance: Theory and practice," Journal of Business Venturing, Elsevier, vol. 27(4), pages 506-521.

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