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Job Creation and Firm Dynamics in the United States

In: Innovation Policy and the Economy, Volume 12


  • John Haltiwanger


Executive SummaryBusiness dynamism plays an important role in job creation and productivity growth in the United States. Business start-ups are an important contributor to that dynamism. Start-ups contribute disproportionately to job creation but are very heterogeneous in terms of productivity. The subsequent "up-or-out" dynamic of young businesses is an important source of job and productivity growth: exiting young businesses are of very low productivity, and the surviving young businesses exhibit rapid growth with above average productivity. The United States shows signs of becoming less dynamic over time--exhibiting a slower pace of reallocation with an accompanying slower pace of job creation from business start-ups. The recent recession saw the lowest overall rate of gross job creation and job creation from start-ups since at least 1980. Job creation for small (young) businesses took an especially large hit in the recession and has been very slow to recover. An open question is whether the observed decline in dynamism exhibited by U.S. businesses will have adverse consequences for U.S. innovation, job, and productivity growth in the future.The fundamental impulse that keeps the capital engine in motion comes from the new consumers' goods, the new methods of production and transportation, the new markets.... [The process] incessantly revolutionizes from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact of capitalism.Joseph Schumpeter
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Suggested Citation

  • John Haltiwanger, 2012. "Job Creation and Firm Dynamics in the United States," NBER Chapters,in: Innovation Policy and the Economy, Volume 12, pages 17-38 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:12451

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    References listed on IDEAS

    1. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2007. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Chapters,in: NBER Macroeconomics Annual 2006, Volume 21, pages 107-180 National Bureau of Economic Research, Inc.
    2. S.K. Bhutani, 2009. "China and India," India Quarterly: A Journal of International Affairs, , vol. 65(4), pages 383-391, October.
    3. Steven J. Davis & R. Jason Faberman & John Haltiwanger & Ron Jarmin & Javier Miranda, 2010. "Business Volatility, Job Destruction, and Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 259-287, April.
    4. Davis, Steven J. & Faberman, R. Jason & Haltiwanger, John, 2012. "Labor market flows in the cross section and over time," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 1-18.
    5. Hulten, Charles R. & Dean, Edwin R. & Harper, Michael (ed.), 2001. "New Developments in Productivity Analysis," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226360621.
    6. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
    7. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
    8. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2013. "The Establishment-Level Behavior of Vacancies and Hiring," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 581-622.
    9. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    10. John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
    11. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters,in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
    12. Eric Bartelsman & John Haltiwanger & Stefano Scarpetta, 2013. "Cross-Country Differences in Productivity: The Role of Allocation and Selection," American Economic Review, American Economic Association, vol. 103(1), pages 305-334, February.
    13. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
    14. Lucia Foster & John Haltiwanger & C. J. Krizan, 2006. "Market Selection, Reallocation, and Restructuring in the U.S. Retail Trade Sector in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 748-758, November.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Growth and dynamism: troubling facts
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2014-06-23 18:19:50


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    Cited by:

    1. Anyadike-Danes, Michael & Bjuggren, Carl-Magnus & Gottschalk, Sandra & Hölzl, Werner & Johansson, Dan & Maliranta, Mika & Myrann, Anja, 2013. "Accounting for Job Growth: Disentangling Size and Age Effects in an International Cohort Comparison," HUI Working Papers 84, HUI Research.
    2. Timothy Kehoe & Sewon Hur & Kim Ruhl & Jose Asturias, 2016. "Firm Entry and Exit and Aggregate Growth," 2016 Meeting Papers 573, Society for Economic Dynamics.
    3. Cristina Fernández & Roberta García & Paloma Lopez-Garcia & Benedicta Marzinotto & Roberta Serafini & Juuso Vanhala & Ladislav Wintr, 2017. "Firm growth in Europe: An overview based on the COMPNET labour module," BCL working papers 107, Central Bank of Luxembourg.
    4. Michael Anyadike-Danes & Carl-Magnus Bjuggren & Sandra Gottschalk & Werner Hölzl & Dan Johansson & Mika Maliranta & Anja Myrann, 2015. "An international cohort comparison of size effects on job growth," Small Business Economics, Springer, vol. 44(4), pages 821-844, April.
    5. Tian, Can, 2015. "Riskiness, endogenous productivity dispersion and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 57(C), pages 227-249.
    6. Dmitriy Sergeyev & Neil Mehrotra, 2015. "Financial Shocks and Job Flows," 2015 Meeting Papers 520, Society for Economic Dynamics.
    7. Hassan Arouri & Adel Ben Youssef & Francesco Quatraro, 2016. "Entry, exit and net job creation in Tunisia: an exploratory analysis," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 323-337, December.
    8. Ursel Baumann & Melina Vasardani, 2016. "The slowdown in US productivity growth - what explains it and will it persist?," Working Papers 215, Bank of Greece.

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