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Uncertainty and the employment dynamics of small and large businesses

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  • Vivek Ghosal
  • Yang Ye

Abstract

We examine the impact of uncertainty on employment dynamics. Alternative measures of uncertainty are constructed based on the survey of professional forecasters, and regression-based forecasting models for GDP growth, inflation, S&P500 stock price index, and fuel prices. Our results indicate that greater uncertainty has a negative impact on growth of employment, and the effects are primarily felt by the relatively smaller businesses; the impact on Large Businesses are generally non-existent or weaker. Our results suggest that to truly understand the effects of uncertainty on employment dynamics, we need to focus on the relatively smaller and entrepreneurial businesses. We discuss implications for the framing of economic policy. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Vivek Ghosal & Yang Ye, 2015. "Uncertainty and the employment dynamics of small and large businesses," Small Business Economics, Springer, vol. 44(3), pages 529-558, March.
  • Handle: RePEc:kap:sbusec:v:44:y:2015:i:3:p:529-558
    DOI: 10.1007/s11187-014-9614-0
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    Keywords

    Uncertainty; Employment; Small Businesses; Entrepreneurship; Real options; Financing constraints; L11; D80; O30; G10; L40;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    Statistics

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    Corrections

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