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Small Business and Job Creation: Dissecting the Myth and Reassessing theFacts

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  • Steven J. Davis
  • John Haltiwanger
  • Scott Schuh

Abstract

This paper investigates how job creation and destruction behavior varies by employer size in the U.S. manufacturing sector during the period 1972 to 1988. The paper also evaluates the empirical basis for conventional claims about the job-creating prowess of small businesses. The chief findings and conclusions fall into five categories: (1) Conventional wisdom about the job-creating prowess of small businesses rests on misleading interpretations of the data. (2) Many previous studies of the job creation process rely upon data that are not suitable for drawing inferences about the relationship between employer size and job creation. (3) Large plants and firms account for most newly-created and newly- destroyed manufacturing jobs. (4) Survival rates for new and existing manufacturing jobs increase sharply with employer size. (5) Smaller manufacturing firms and plants exhibit sharply higher gross rates of job creation but not higher net rates.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4492.

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Date of creation: Oct 1993
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Publication status: published as Labor Markets, Employment Policy and Job Creation. Lewis Solmon and Alec Levenson, eds. Westview Press, 1994.
Handle: RePEc:nbr:nberwo:4492

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  1. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 820, C.E.P.R. Discussion Papers.
  2. Anil K. Kashyap & Jeremy C. Stein, 1994. "Monetary Policy and Bank Lending," NBER Chapters, National Bureau of Economic Research, Inc, in: Monetary Policy, pages 221-261 National Bureau of Economic Research, Inc.
  3. Steven J. Davis & John Haltiwanger, 1995. "Employer Size and The Wage Structure in U.S. Manufacturing," NBER Working Papers 5393, National Bureau of Economic Research, Inc.
  4. Lilien, David M, 1980. "The Cyclical Pattern of Temporary Layoffs in United States Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 62(1), pages 24-31, February.
  5. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(4), pages 567-81, June.
  6. John Haltiwanger & Steven J Davis & Scott Schuh, 1991. "Published Versus Sample Statistics From The ASM: Implications For The LRD," Working Papers, Center for Economic Studies, U.S. Census Bureau 91-1, Center for Economic Studies, U.S. Census Bureau.
  7. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
  8. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262540932, December.
  9. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, American Economic Association, vol. 78(4), pages 678-90, September.
  10. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(4), pages 2129-32, December.
  11. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
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