Business dynamics and employment growth: A cross-country analysis
This paper examines the relationship between business dynamics (entry and exit of firms) and employment growth at the country-industry level. We use a cross-country data set with harmonized data on numbers of entries and exits for a selection of fast growing and innovative industries in six developed economies. In our multiple regression analysis we allow for separate effects of both the extent of business dynamics (volatility of firms) and the composition of business dynamics (net-entry of firms). We also test for the existence of an 'optimal' level of business volatility, possibly indicating that entry and exit levels are too high in certain industries. We find positive employment effects of net-entry rates, both for manufacturing industries and for services industries. Regarding volatility, we find a positive effect for manufacturing but no effect for services. This implies that different government policies may be required to achieve growth in these sectors. We find no evidence for an 'optimal' level of business volatility.
|Date of creation:||16 Mar 2004|
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ERSA conference papers
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- Henry Nieuwenhuijsen & Niels Bosma, 2002. "Turbulence and Productivity; an analysis of 40 Dutch regions in the period 1988-1996," Scales Research Reports N200205, EIM Business and Policy Research.
- David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 113-124.
- Fritsch, Michael & Mueller, Pamela, 2004. "The effect of new firm formation on regional development over time," Freiberg Working Papers 2004,01, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
- Roy Thurik, 2003. "Entrepreneurship and Unemployment in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 264-290, 08.
- André van Stel & David Storey, 2003. "Investigating the link between firm births and job creation in British regions, 1980-98: Is there a Upas Tree effect?," Scales Research Reports N200317, EIM Business and Policy Research. Full references (including those not matched with items on IDEAS)
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