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Job Creation and Destruction: New Evidence on the Role of Small Versus Young Firms in Korea

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  • Janghee Cho
  • Hyunbae Chun
  • Hongjun Kim
  • Yoonsoo Lee

Abstract

Using the Census on Establishments data in Korea, the present study revisits the role of firm age and size to explain aggregate employment dynamics. We confirm the finding of Haltiwanger et al. that no systematic inverse relationship exists between net job growth and firm size once firm age is controlled for. We find that small businesses are driving forces of aggregate employment growth but that such high growth is mostly driven by the entry of very small firms, which is offset by job destructions of a similar magnitude. Moreover, entrepreneurial activity occurs among very small firms, whereas large start-ups are rarely observed.
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Suggested Citation

  • Janghee Cho & Hyunbae Chun & Hongjun Kim & Yoonsoo Lee, 2017. "Job Creation and Destruction: New Evidence on the Role of Small Versus Young Firms in Korea," The Japanese Economic Review, Japanese Economic Association, vol. 68(2), pages 173-187, June.
    • Handle: RePEc:bla:jecrev:v:68:y:2017:i:2:p:173-187
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    File URL: http://hdl.handle.net/10.1111/jere.12133
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    References listed on IDEAS

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    1. Mark Gertler & Simon Gilchrist, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 309-340.
    2. Junghwan Hyun, 2016. "Job Reallocation, Financial Crises, And Policy Reforms: Evidence From Korea," Contemporary Economic Policy, Western Economic Association International, vol. 34(4), pages 729-745, October.
    3. Martina Lawless, 2014. "Age or size? Contributions to job creation," Small Business Economics, Springer, vol. 42(4), pages 815-830, April.
    4. Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2014. "Who creates jobs in developing countries?," Small Business Economics, Springer, vol. 43(1), pages 75-99, June.
    5. Giuseppe Moscarini & Fabien Postel-Vinay, 2012. "The Contribution of Large and Small Employers to Job Creation in Times of High and Low Unemployment," American Economic Review, American Economic Association, vol. 102(6), pages 2509-2539, October.
    6. 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.
    7. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
    8. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
    9. Gerrit Wit & Jan Kok, 2014. "Do small businesses create more jobs? New evidence for Europe," Small Business Economics, Springer, vol. 42(2), pages 283-295, February.
    10. repec:hal:spmain:info:hdl:2441/59cr4u3mmr9pobrceptvua5g8c is not listed on IDEAS
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    Cited by:

    1. Stephen Esaku, 2022. "Which firms drive employment growth in Sub-Saharan Africa? Evidence from Kenya," Small Business Economics, Springer, vol. 59(1), pages 383-396, June.
    2. Kim, Minho, 2017. "Aggregate Productivity Growth in Korean Manufacturing: The Role of Young Plants," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 39(4), pages 1-23.
    3. Lee, Changkeun & Won, Cheongyeon, 2021. "Job reallocation in Korean manufacturing: 1984–2014," Journal of Asian Economics, Elsevier, vol. 74(C).

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    More about this item

    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
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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