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Job Creation and the Role of Dependencies

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  • Fornaro, Paolo
  • Luomaranta, Henri

Abstract

We contribute to the large literature on the relation between firm size and job creation by examining the effects of dependences between enterprises. Using Finnish monthly data encompassing the population of Finnish private businesses, we calculate gross job creation and destruction, together with net job creation, for different size classes and industries. Importantly, we divide firms into a dependent (i.e. owned, at least partially, by a large company) and independent category. The analysis is based on both a dataset including entry and exit and a sample considering only continuous companies, to control for the effects of firm's age. Due to the quality of the data, we are able to isolate the 'organic' growth of firms, disregarding the effects of mergers and split-offs together with other legal restructurings. We find that independent companies have shown considerably higher net job creation, even after taking age into account. However, dependent firms do not show particularly different behavior with respect to the sensitivity to aggregate conditions, compared to their independent counterparts.

Suggested Citation

  • Fornaro, Paolo & Luomaranta, Henri, 2016. "Job Creation and the Role of Dependencies," MPRA Paper 71586, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:71586
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    References listed on IDEAS

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    Cited by:

    1. Fornaro, Paolo & Luomaranta, Henri, 2017. "Small and Medium Firms, Aggregate Productivity and the Role of Dependencies," ETLA Working Papers 47, The Research Institute of the Finnish Economy.

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    More about this item

    Keywords

    Dependencies; Job Creation; Firm-level Data; Large datasets; Employment statistics;
    All these keywords.

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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