IDEAS home Printed from https://ideas.repec.org/a/eee/jmacro/v33y2011i4p754-769.html
   My bibliography  Save this article

Are small employers more cyclically sensitive? Evidence from Brazil

Author

Listed:
  • Cravo, Túlio A.

Abstract

An important issue facing policymakers is the degree to which fluctuations in economic activity affect employment in large and small businesses across sectors and regions. This issue is particularly relevant for developing countries as it matters for the understanding of the labour market dynamics, and for devising national, sectoral, and regional labour policies that aim at dampening employment fluctuations, particularly during recessions. Using a unique monthly dataset of 27 states and eight industries from 2000:1 to 2009:7, this paper evaluates the sensitivity of businesses of different sizes to business cycle conditions in Brazil. The behaviour of the difference in employment growth rates between large and small firms is counter-cyclical and suggests that small firms are more sensitive to business cycle conditions. In addition, the SVAR impulse response analysis suggests the existence of the effect of small firms hiring cheaply from unemployment proportionally more than large ones. On the other hand, credit constraints seem to hit small firms harder and help to explain the empirical regularity that small firms are more cyclically sensitive than large ones for the Brazilian case.

Suggested Citation

  • Cravo, Túlio A., 2011. "Are small employers more cyclically sensitive? Evidence from Brazil," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 754-769.
  • Handle: RePEc:eee:jmacro:v:33:y:2011:i:4:p:754-769
    DOI: 10.1016/j.jmacro.2011.06.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0164070411000486
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jmacro.2011.06.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. George W. Stadler, 1994. "Real Business Cycles," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1750-1783, December.
    2. Stock, James H. & Watson, Mark W., 1999. "Business cycle fluctuations in us macroeconomic time series," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 1, pages 3-64, Elsevier.
    3. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "The Effects of Labour Market Policies in an Economy with an Informal Sector," Economic Journal, Royal Economic Society, vol. 119(539), pages 1105-1129, July.
    4. João Victor Issler & Hilton Hostalacio Notini & Claudia Fontoura Rodrigues, 2013. "Constructing coincident and leading indices of economic activity for the Brazilian economy," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2012(2), pages 43-65.
    5. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    6. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    7. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
    8. Mark Gertler & Simon Gilchrist, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 309-340.
    9. Giuseppe Moscarini & Fabien Postel-Vinay, 2009. "Large Employers Are More Cyclically Sensitive," NBER Working Papers 14740, National Bureau of Economic Research, Inc.
    10. Philippe Aghion & Philippe Askenazy & Nicolas Berman & Gilbert Cette & Laurent Eymard, 2012. "Credit Constraints And The Cyclicality Of R&D Investment: Evidence From France," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1001-1024, October.
    11. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1.
    12. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-1171, September.
    13. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    14. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115, pages 69-102.
    15. Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, May.
    16. Harrison, Ann E & Leamer, Edward, 1997. "Labor Markets in Developing Countries: An Agenda for Research," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 1-19, July.
    17. Rua, Antonio & Nunes, Luis C., 2005. "Coincident and leading indicators for the euro area: A frequency band approach," International Journal of Forecasting, Elsevier, vol. 21(3), pages 503-523.
    18. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2006. "The influence of financial and legal institutions on firm size," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2995-3015, November.
    19. Marcio Laurini & Eduardo Andrade & Pedro L. Valls Pereira, 2005. "Income convergence clubs for Brazilian Municipalities: a non-parametric analysis," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2099-2118.
    20. Veracierto, Marcelo, 2008. "On the cyclical behavior of employment, unemployment and labor force participation," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1143-1157, September.
    21. Tung Liu & Lee C. Spector, 2005. "Dynamic employment adjustments over business cycles," Empirical Economics, Springer, vol. 30(1), pages 151-169, January.
    22. Aghion, P. & Askenazy, P. & Berman, N. & Cette, G. & Eymard, L., 2008. "Credit Constraints and the Cyclicality of R&D Investment: Evidence from France," Working papers 198, Banque de France.
    23. Ricardo Paes de Barros & Carlos Henrique Corseuil, 2004. "The Impact of Regulations on Brazilian Labor Market Performance," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 273-350, National Bureau of Economic Research, Inc.
    24. Áureo De Paula & José A. Scheinkman, 2011. "The Informal Sector: An Equilibrium Model And Some Empirical Evidence From Brazil," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 8-26, May.
    25. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    26. Neumeyer, Pablo A. & Perri, Fabrizio, 2005. "Business cycles in emerging economies: the role of interest rates," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 345-380, March.
    27. Rafael La Porta & Andrei Shleifer, 2008. "The Unofficial Economy and Economic Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 275-363.
    28. Moura, Marcelo L. & de Carvalho, Alexandre, 2010. "What can Taylor rules say about monetary policy in Latin America?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 392-404, March.
    29. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184, National Bureau of Economic Research, Inc.
    30. Rand, John & Tarp, Finn, 2002. "Business Cycles in Developing Countries: Are They Different?," World Development, Elsevier, vol. 30(12), pages 2071-2088, December.
    31. repec:hrv:faseco:33078210 is not listed on IDEAS
    32. Henley, Andrew & Arabsheibani, G. Reza & Carneiro, Francisco G., 2009. "On Defining and Measuring the Informal Sector: Evidence from Brazil," World Development, Elsevier, vol. 37(5), pages 992-1003, May.
    33. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2005. "SMEs, Growth, and Poverty: Cross-Country Evidence," Journal of Economic Growth, Springer, vol. 10(3), pages 199-229, September.
    34. Heckman, James J. & Pages, Carmen (ed.), 2004. "Law and Employment," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226322827, January.
    35. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. "Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, vol. 8(4), pages 297-315, August.
    36. Sachsida, Adolfo & Junior, Roberto de Góes Ellery & Gomes, Victor, 2002. "Business Cycle Fluctuations in Brazil," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 56(2), April.
    37. Christian Volpe Martincus & Andrea Molinari, 2007. "Regional Business Cycles and National Economic Borders: What Are the Effects of Trade in Developing Countries?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(1), pages 140-178, April.
    38. Afonso Ferreira, 2000. "Convergence in Brazil: recent trends and long-run prospects," Applied Economics, Taylor & Francis Journals, vol. 32(4), pages 479-489.
    39. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 14(Spr), pages 3-18.
    40. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1.
    41. Raul Silveira‐Neto & Carlos R. Azzoni, 2006. "Location and regional income disparity dynamics: The Brazilian case," Papers in Regional Science, Wiley Blackwell, vol. 85(4), pages 599-613, November.
    42. Geoffrey H. Moore, 1961. "Leading and Confirming Indicators of General Business Changes," NBER Chapters, in: Business Cycle Indicators, Volume 1, pages 45-109, National Bureau of Economic Research, Inc.
    43. Thorsten Beck & Asli Demirgüç‐Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, February.
    44. Giuseppe Moscarini & Fabien Postel-Vinay, 2009. "The Timing of Labor Market Expansions: New Facts and a New Hypothesis," NBER Chapters, in: NBER Macroeconomics Annual 2008, Volume 23, pages 1-51, National Bureau of Economic Research, Inc.
    45. Thorsten Beck & Asli Demirgüç-Kunt, 2004. "SMEs, Growth, and Poverty," World Bank Publications - Reports 11278, The World Bank Group.
    46. Fabio Kanczuk, 2004. "Real Interest Rates and Brazilian Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 436-455, April.
    47. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
    48. Almeida, Rita & Carneiro, Pedro, 2009. "Enforcement of labor regulation and firm size," Journal of Comparative Economics, Elsevier, vol. 37(1), pages 28-46, March.
    49. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    50. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
    51. Giuseppe Moscarini & Fabien Postel-Vinay, 2010. "Unemployment and Small Cap Returns: The Nexus," American Economic Review, American Economic Association, vol. 100(2), pages 333-337, May.
    52. Meghana Ayyagari & Thorsten Beck & Asli Demirguc-Kunt, 2007. "Small and Medium Enterprises Across the Globe," Small Business Economics, Springer, vol. 29(4), pages 415-434, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter Brummund & Laura Connolly, 2019. "Who Creates Stable Jobs? Evidence from Brazil," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 81(3), pages 540-563, June.
    2. Tulio A. Cravo, 2017. "Firm size and business cycles," IZA World of Labor, Institute of Labor Economics (IZA), pages 371-371, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Túlio Cravo, 2011. "Are Small Firms more cyclically Sensitive than Large Ones? National, Regional and Sectoral Evidence from Brazil," ERSA conference papers ersa10p507, European Regional Science Association.
    2. Ghate, Chetan & Pandey, Radhika & Patnaik, Ila, 2013. "Has India emerged? Business cycle stylized facts from a transitioning economy," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 157-172.
    3. Luca Benati, 2001. "Band-pass filtering, cointegration, and business cycle analysis," Bank of England working papers 142, Bank of England.
    4. Pontines, Victor, 2017. "The financial cycles in four East Asian economies," Economic Modelling, Elsevier, vol. 65(C), pages 51-66.
    5. Túlio A. Cravo, 2010. "SMEs and economic growth in the Brazilian micro‐regions," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 711-734, November.
    6. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007, Elsevier.
    7. Epstein, Brendan & Finkelstein Shapiro, Alan, 2019. "Financial development, unemployment volatility, and sectoral dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 99(C), pages 82-102.
    8. Celsa Machado, 2001. "Measuring Business Cycles: The Real Business Cycle Approach and Related Controversies," FEP Working Papers 107, Universidade do Porto, Faculdade de Economia do Porto.
    9. de Carvalho, Miguel & Rua, António, 2017. "Real-time nowcasting the US output gap: Singular spectrum analysis at work," International Journal of Forecasting, Elsevier, vol. 33(1), pages 185-198.
    10. Luc Dresse & Christophe Van Nieuwenhuyze, 2008. "Do survey indicators let us see the business cycle ? A frequency decomposition," Working Paper Research 131, National Bank of Belgium.
    11. Túlio Cravo, 2011. "Regional Economic Growth and SMEs in Brazil: a Spatial Analysis (Submission for the Refereed Y-session Papers)," ERSA conference papers ersa10p508, European Regional Science Association.
    12. Tawadros, George B., 2011. "The stylised facts of Australia's business cycle," Economic Modelling, Elsevier, vol. 28(1), pages 549-556.
    13. Saini, Seema & Ahmad, Wasim & Bekiros, Stelios, 2021. "Understanding the credit cycle and business cycle dynamics in India," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 988-1006.
    14. Eduardo Loría & Emmanuel Salas, 2014. "Ciclos, crecimiento económico y crisis en México, 1980.1-2013.4," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 29(2), pages 131-161.
    15. Ard den Reijer, 2006. "The Dutch business cycle: which indicators should we monitor?," DNB Working Papers 100, Netherlands Central Bank, Research Department.
    16. Michaelides, Panayotis G. & Papageorgiou, Theofanis & Vouldis, Angelos T., 2013. "Business cycles and economic crisis in Greece (1960–2011): A long run equilibrium analysis in the Eurozone," Economic Modelling, Elsevier, vol. 31(C), pages 804-816.
    17. Konstantakopoulou, Ioanna & Tsionas, Efthymios G., 2014. "Half a century of empirical evidence of business cycles in OECD countries," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 389-409.
    18. Viv B. Hall & Peter Thomson, 2021. "Does Hamilton’s OLS Regression Provide a “better alternative” to the Hodrick-Prescott Filter? A New Zealand Business Cycle Perspective," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(2), pages 151-183, November.
    19. Paul Cashin & Sam Ouliaris, 2004. "Key Features of Australian Business Cycles," Australian Economic Papers, Wiley Blackwell, vol. 43(1), pages 39-58, March.
    20. Baffigi, Alberto & Bontempi, Maria Elena & Felice, Emanuele & Golinelli, Roberto, 2015. "The changing relationship between inflation and the economic cycle in Italy: 1861–2012," Explorations in Economic History, Elsevier, vol. 56(C), pages 53-70.

    More about this item

    Keywords

    Firm size; Jobs flows; Business cycles; Market structure;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:33:y:2011:i:4:p:754-769. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622617 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.