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Assessing Job Flows across Countries: The Role of Industry, Firm Size and Regulations

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Author Info

  • Haltiwanger, John C.

    ()
    (University of Maryland)

  • Scarpetta, Stefano

    ()
    (OECD)

  • Schweiger, Helena

    ()
    (EBRD, London)

Abstract

This paper reviews the process of job creation and destruction across a sample of 16 industrial and emerging economies over the past decade. It exploits a harmonized firm-level data-set drawn from business registers and enterprise census data. The paper assesses the importance of technological factors that characterize different industries in explaining cross-country differences in job flows. It shows that industry effects play an important role in shaping job flows at the aggregate level. Even more importantly, differences in the size composition of firms – within each industry – explain a large fraction of the overall variability in job creation and destruction. However, even after controlling for industry/technology and size factors there remain significant differences in job flows across countries that could reflect differences in business environment conditions. In this paper, we look at one factor shaping the business environment, namely, regulations on hiring and firing of workers. To minimize possible endogeneity and omitted variable problems associated with cross-country regressions, we use a difference-in-difference approach. The empirical results suggest that stringent hiring and firing costs reduce job turnover, especially in those industries that require more frequent labor adjustment. Regulations also distort the patterns of industry/size flows. Within each industry, medium and large firms are more severely affected by stringent labor regulations, while small firms are less affected, probably because they are partially exempted from such regulations or can more easily circumvent them.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2450.

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Length: 55 pages
Date of creation: Nov 2006
Date of revision:
Publication status: forthcoming as "Cross Country Differences in Job Reallocation: The Role of Industry, Firm Size and Regulations" in: Labour Economics
Handle: RePEc:iza:izadps:dp2450

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Keywords: product and labor market regulations; firm size; firm dynamics; gross job flows; firm-level data;

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References

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  1. Bertola, Giuseppe, 1992. "Labor Turnover Costs and Average Labor Demand," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 10(4), pages 389-411, October.
  2. bertola, G. & Rogerson, R., 1996. "Institutions and Labor Reallocation," Papers, Banca Italia - Servizio di Studi 272, Banca Italia - Servizio di Studi.
  3. James Heckman & Carmen Pages, 2003. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Working Papers 10129, National Bureau of Economic Research, Inc.
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  5. Haltiwanger, John C. & Vodopivec, Milan, 2002. "Worker Flows, Job Flows and Firm Wage Policies: An Analysis of Slovenia," IZA Discussion Papers 569, Institute for the Study of Labor (IZA).
  6. Claessens, Stijn & Laeven, Luc, 2002. "Financial development, property rights, and growth," Policy Research Working Paper Series, The World Bank 2924, The World Bank.
  7. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, Elsevier, vol. 79(1), pages 1-45, March.
  8. Eric Bartelsman & John Haltiwanger & Stefano Scarpetta, 2009. "Measuring and Analyzing Cross-country Differences in Firm Dynamics," NBER Chapters, National Bureau of Economic Research, Inc, in: Producer Dynamics: New Evidence from Micro Data, pages 15-76 National Bureau of Economic Research, Inc.
  9. Steven J. Davis & John Haltiwanger, 1996. "On the Driving Forces Behind Cyclical Movement, in Employment and Job Reallocation," NBER Working Papers 5775, National Bureau of Economic Research, Inc.
  10. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  11. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 7(1), pages 48-71, January.
  12. Alejandro Micco - Carmen Pages, 2004. "Employment Protection and Gross Job Flows1," Econometric Society 2004 Latin American Meetings, Econometric Society 295, Econometric Society.
  13. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(5), pages 915-38, October.
  14. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2004. "Business environment and firm entry : Evidence from international data," Policy Research Working Paper Series, The World Bank 3232, The World Bank.
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  17. repec:dgr:uvatin:2004114 is not listed on IDEAS
  18. C.J. Krizan & John Haltiwanger & Lucia Foster, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," Working Papers, Center for Economic Studies, U.S. Census Bureau 02-18, Center for Economic Studies, U.S. Census Bureau.
  19. Bartelsman, Eric & Haltiwanger, John & Scarpetta1, Stefano, 2004. "Microeconomic evidence of creative destruction in industrial and developing countries," Policy Research Working Paper Series, The World Bank 3464, The World Bank.
  20. John Haltiwanger & Milan Vodopivec, 2003. "Worker flows, job flows and firm wage policies," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 11(2), pages 253-290, June.
  21. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  22. Boeri, Tito, 1999. "Enforcement of employment security regulations, on-the-job search and unemployment duration," European Economic Review, Elsevier, Elsevier, vol. 43(1), pages 65-89, January.
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