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Have Small Firms Created a Disproportionate Share of New Jobs in Canada? A Reassessment of the Facts

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Author Info

  • Picot, Garnett
  • Dupuy, Richard
  • Baldwin, John R.

Abstract

The statistical observation that small firms have created the majority of new jobs during the 1980s has had a tremendous influence on public policy. Governmentshave looked to the small firm sector for employment growth, and have promoted policies to augment this expansion. However, recent research in the US suggeststhat net job creation in the small firm sector may have been overestimated, relative to that in large firms. This paper addresses various measurement issues raised inthe recent research, and uses a very unique Canadian longitudinal data set that encompasses all companies in the Canadian economy to reassess the issue of jobcreation by firm size. We conclude that over the 1978-92 period, for both the entire Canadian economy and the manufacturing sector, the growth rate of (net)employment decreases monotonically as the size of firm increases, no matter which method of sizing firms is used. The small firm sector has accounted for adisproportionate share of both gross job gains and job losses, and in that aggregate, accounted for a disproportionate share of the employment increase over theperiod. Measurement does matter, however, as the magnitude of the difference in the growth rates of small and large firms is very sensitive to the measurementapproaches used. The paper also produces results for various industrial sectors, asks whether the more rapid growth in industries with a high proportion of smallfirms is responsible for the findings at the all-economy level, and examines employment growth in existing small and large firms (ie excluding births). It is found thatemployment growth in the population of existing small and large firms is very similar.

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Bibliographic Info

Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 1994071e.

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Date of creation: 16 Nov 1994
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Handle: RePEc:stc:stcp3e:1994071e

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Web page: http://www.statcan.gc.ca
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Keywords: Business performance and ownership; Employment and unemployment; Entry; exit; mergers and growth; Labour; Small and medium-sized businesses; Workplace organization; innovation; performance;

References

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  1. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 91-5, Federal Reserve Bank of Chicago.
  2. Picot, Garnett & Baldwin, John R., 1994. "Employment Generation by Small Producers in the Canadian Manufacturing Sector," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 1994070e, Statistics Canada, Analytical Studies Branch.
  3. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. " Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, Springer, vol. 8(4), pages 297-315, August.
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Citations

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Cited by:
  1. Bernd Ebersberger, 2011. "Public funding for innovation and the exit of firms," Journal of Evolutionary Economics, Springer, Springer, vol. 21(3), pages 519-543, August.
  2. Baldwin, John R. & Gellatly, Guy, 2006. "Innovation Capabilities: The Knowledge Capital Behind the Survival and Growth of Firms," The Canadian Economy in Transition 2006013e, Statistics Canada, Economic Analysis.
  3. Gellatly, Guy & Baldwin, John R., 1998. "Are There High-tech Industries or Only High-tech Firms? Evidence from New Technology-based Firms," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 1998120e, Statistics Canada, Analytical Studies Branch.
  4. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, Elsevier, vol. 7(5), pages 471-505, September.
  5. Drolet, Marie & Morissette, Rene, 1998. "Recent Canadian Evidence on Job Quality by Firm Size," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 1998128e, Statistics Canada, Analytical Studies Branch.
  6. Paloma Lopez-Garcia & Sergio Puente & Angel Luis Gomez, 2009. "Employment Generation By Small Producers In Spain," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business, Babes-Bolyai University, Faculty of Business.
  7. Baldwin, John R., 2000. "Innovation and Training in New Firms," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 2000123e, Statistics Canada, Analytical Studies Branch.
  8. Baldwin, John R., 1999. "A Portrait of Entrants and Exits," Analytical Studies Branch Research Paper Series, Statistics Canada, Analytical Studies Branch 1999121e, Statistics Canada, Analytical Studies Branch.

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