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Explaining National Differences in the Size and Industry Distribution of Employment

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  • Steven J. Davis
  • Magnus Henrekson

Abstract

What factors determine national differences in the size and industry distribution of employment? We stress the role of the economic policy environment as determined by business taxes, employment securitylaws, credit market regulations, the national pension system, wage-setting institutions and the size of the public sector. We characterize these aspects of the policy environment in Sweden prior to 1990-91 and compare them to the situation in other European countries and the United States. Our characterization and international comparisons show that Swedish policies strongly disfavored less capital-intensive firms, smaller firms, entry by new firms and individual and family ownership of business. We also compile evidence that these policies affect outcomes. Taking the U.S. industry distribution as a benchmark that reflects a comparatively neutral set of policies and institutions, Sweden's employment distribution in the mid-1980s is sharply tilted away from low-wage industries and industries with greater employment shares for smaller firms and establishments. Compared to other European countries, Sweden has an unusually high share of employment in large firms. Furthermore, the Swedish rate of self-employment in the 1970s and 80s is the lowest among all OECD countries. The institutional and policy factors emphasized by our study differ greatly across countries. This fact suggests that our approach can be fruitfully applied to other studies of national differences in industry and size structures and their evolution over time. As an example, the tax reform wave of the 1980s which largely evened out cross-country differences in corporate taxation among OECD countries offers some basis for projecting a movement towards greater similarity among wealthy countries in the size and industry distribution of employment.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6246.

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Date of creation: Oct 1997
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Publication status: published as Small Business Economics, Vol. 12, no. 1 (February 1999): 59-83.
Handle: RePEc:nbr:nberwo:6246

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  1. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  2. Jorgenson, D.W., 1992. "Tax Reform and the Cost of Capital : An International Comparison," Harvard Institute of Economic Research Working Papers 1621, Harvard - Institute of Economic Research.
  3. Södersten, Jan, 1986. "The Investment Funds System Reconsidered," Working Paper Series, Research Institute of Industrial Economics 174, Research Institute of Industrial Economics, revised Jan 1988.
  4. Leamer , Edward E. & Lundborg , Per, 1995. "A Heckscher-Ohlin View of Sweden Competing in the Global Marketplace," Working Paper Series, Research Institute of Industrial Economics 437, Research Institute of Industrial Economics.
  5. King, Mervyn A. & Fullerton, Don, 2010. "The Taxation of Income from Capital," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226436319, March.
  6. Zoltan Acs & David Audretsch, 1990. "Innovation and Small Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011131, December.
  7. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, October.
  8. 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.
  9. Edin, P.A. & Holmlund, B., 1992. "The Swedish Wage Structure : The Rise and Fall of Solidarity Policy," Papers, Uppsala - Working Paper Series 1992-13, Uppsala - Working Paper Series.
  10. 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.
  11. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, October.
  12. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  13. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 972-90, October.
  14. Steven J. Davis & Magnus Henrekson, 1997. "Industrial Policy, Employer Size, and Economic Performance in Sweden," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 353-398 National Bureau of Economic Research, Inc.
  15. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1987. "Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 5(1), pages 76-89, January.
  16. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  17. 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.
  18. Stefan Fölster & Sam Peltzman, 1993. "The Social Costs of Regulation and Lack of Competition in Sweden," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 91, Chicago - Center for Study of Economy and State.
  19. Erik Norrman & Charles E. McLure Jr., 1997. "Tax Policy in Sweden," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 109-154 National Bureau of Economic Research, Inc.
  20. Davis, Steven J., 1997. "Sorting, learning, and mobility when jobs have scarcity value : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 46(1), pages 327-337, June.
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