Do Small Businesses Create More Jobs? New Evidence for the United States from the National Establishment Time Series
AbstractWe use a new database, the National Establishment Time Series (NETS), to revisit the debate about the role of small businesses in job creation. Birch (e.g., 1987) argued that small firms are the most important source of job creation in the U.S. economy. But Davis et al. (1996a) argued that this conclusion was flawed, and based on improved methods and using data for the manufacturing sector, they concluded that there was no relationship between establishment size and net job creation. Using the NETS data, we examine evidence for the overall economy, as well as for different sectors. The results indicate that small firms and small establishments create more jobs, on net, although the difference is much smaller than what is suggested by Birch's methods. Moreover, in the recent period we study, a negative relationship between establishment size and job creation holds for both the manufacturing and services sectors.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3888.
Length: 32 pages
Date of creation: Dec 2008
Date of revision:
Publication status: published in: Review of Economics and Statistics, 2011, 93(1), 16-29
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Other versions of this item:
- David Neumark & Brandon Wall & Junfu Zhang, 2011. "Do Small Businesses Create More Jobs? New Evidence for the United States from the National Establishment Time Series," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 16-29, August.
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
- NEP-ENT-2009-01-03 (Entrepreneurship)
- NEP-LTV-2009-01-03 (Unemployment, Inequality & Poverty)
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