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Job Creation by Firms in Denmark

Author

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  • Ibsen, Rikke

    (Aarhus School of Business)

  • Westergård-Nielsen, Niels C.

    (Copenhagen Business School)

Abstract

In this paper we will look at job creation and destruction in firms. We will answer the question if it is the large companies that create jobs, while the smaller companies are contributing much less. Or is it the young companies that create jobs? And who destroys the most jobs? In the crisis Denmark lost 186,000 jobs in the private sector. The question is where and how could these jobs be recreated. Are these issues specific to industries or are they universal? The data used is register data on workplaces and firms for the period 1980-2007. The base unit of data is the workplace. The company (firm) is the legal entity. A company can have many sites, and one of the ways companies can grow is by expanding with multiple sites. This can happen by mergers and acquisitions but can also happen by creating "daughter workplaces". It is therefore essential to look at workplaces and firms at the same time. A complication here is that firms switch ID over time because of change of ownership, mergers and divisions. Data must be corrected so that these administrative issues will not affect the survival of firms. The data are used in a way where we can cover firm birth and firm death, spin-offs and mergers. The analysis will make it possible to differentiate between net and gross creation of jobs because we can follow each single individual in and out of jobs. We have for Denmark found that size on its own does not have a big impact, but young firms are much more likely to contribute to a positive growth. For the U.S. it has been found that the growth in jobs comes from small businesses. A closer analysis though shows that the main factor here is the firm age. Thus, it is found that young firms net create the most jobs, but they are also responsible for the most job destructions.

Suggested Citation

  • Ibsen, Rikke & Westergård-Nielsen, Niels C., 2011. "Job Creation by Firms in Denmark," IZA Discussion Papers 5458, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5458
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    References listed on IDEAS

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    1. 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, December.
    2. Hethey, Tanja & Schmieder, Johannes F., 2010. "Using worker flows in the analysis of establishment turnover : evidence from German administrative data," FDZ Methodenreport 201006_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 671-698.
    4. repec:iab:iabfme:201006(en is not listed on IDEAS
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    Cited by:

    1. Carly Petracco & Helena Schweiger, 2012. "The impact of armed conflict on firms’ performance and perceptions," Working Papers 152, European Bank for Reconstruction and Development, Office of the Chief Economist.
    2. Arráiz,Irani & Bruhn,Miriam & Stucchi,Rodolfo Mario, 2015. "Psychometrics as a tool to improve screening and access to credit," Policy Research Working Paper Series 7506, The World Bank.
    3. Arráiz,Irani & Bruhn,Miriam & Stucchi,Rodolfo Mario, 2015. "Psychometrics as a tool to improve screening and access to credit," Policy Research Working Paper Series 7506, The World Bank.
    4. Criscuolo, Chiara & Gal, Peter N. & Menon, Carlo, 2014. "The dynamics of employment growth: new evidence from 18 countries," LSE Research Online Documents on Economics 60286, London School of Economics and Political Science, LSE Library.
    5. Salem Abo-Zaid, 2014. "Net job creation in the US economy: lessons from monthly data, 1950-2011," Applied Economics, Taylor & Francis Journals, vol. 46(22), pages 2623-2638, August.
    6. F. Voulgaris & G. Agiomirgianakis & T. Papadogonas, 2015. "Job creation and job destruction in economic crisis at firm level: the case of Greek manufacturing sectors," International Economics and Economic Policy, Springer, vol. 12(1), pages 21-39, March.

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    More about this item

    Keywords

    job creation; job destruction; firm age; firm size; education; employer-employee data;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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