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Have Small Firms Created a Disproportionate Share of New Jobs in Canada? A Reassessment of the Facts

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  • Baldwin, John R.
  • Dupuy, Richard
  • Picot, Garnett

Abstract

The statistical observation that small firms have created the majority of new jobs during the 1980s has had a tremendous influence on public policy. Governmentshave looked to the small firm sector for employment growth, and have promoted policies to augment this expansion. However, recent research in the US suggeststhat net job creation in the small firm sector may have been overestimated, relative to that in large firms. This paper addresses various measurement issues raised inthe recent research, and uses a very unique Canadian longitudinal data set that encompasses all companies in the Canadian economy to reassess the issue of jobcreation by firm size. We conclude that over the 1978-92 period, for both the entire Canadian economy and the manufacturing sector, the growth rate of (net)employment decreases monotonically as the size of firm increases, no matter which method of sizing firms is used. The small firm sector has accounted for adisproportionate share of both gross job gains and job losses, and in that aggregate, accounted for a disproportionate share of the employment increase over theperiod. Measurement does matter, however, as the magnitude of the difference in the growth rates of small and large firms is very sensitive to the measurementapproaches used. The paper also produces results for various industrial sectors, asks whether the more rapid growth in industries with a high proportion of smallfirms is responsible for the findings at the all-economy level, and examines employment growth in existing small and large firms (ie excluding births). It is found thatemployment growth in the population of existing small and large firms is very similar.

Suggested Citation

  • Baldwin, John R. & Dupuy, Richard & Picot, Garnett, 1994. "Have Small Firms Created a Disproportionate Share of New Jobs in Canada? A Reassessment of the Facts," Analytical Studies Branch Research Paper Series 1994071e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:1994071e
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    File URL: http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=11F0019M1994071&ObjType=46&lang=en&limit=0
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    References listed on IDEAS

    as
    1. 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.
    2. Baldwin, John & Picot, Garnett, 1995. "Employment Generation by Small Producers in the Canadian Manufacturing Sector," Small Business Economics, Springer, vol. 7(4), pages 317-331, August.
    3. Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 819-863.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Baldwin, John R., 2000. "Innovation and Training in New Firms," Analytical Studies Branch Research Paper Series 2000123e, Statistics Canada, Analytical Studies Branch.
    2. Paloma Lopez-Garcia & Sergio Puente & Angel Luis Gomez, 2009. "Employment Generation By Small Producers In Spain," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    3. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
    4. Baldwin, John R. & Gellatly, Guy, 1998. "Are There High-tech Industries or Only High-tech Firms? Evidence from New Technology-based Firms," Analytical Studies Branch Research Paper Series 1998120e, Statistics Canada, Analytical Studies Branch.
    5. Alia El Mahdi & Magued Osman, 2003. "An Assessment of the Effectiveness of Small and Micro-Enterprise Finance in Employment Creation," Working Papers 0313, Economic Research Forum, revised 05 Jan 2003.
    6. Baldwin, John R., 1999. "A Portrait of Entrants and Exits," Analytical Studies Branch Research Paper Series 1999121e, Statistics Canada, Analytical Studies Branch.
    7. Bernd Ebersberger, 2011. "Public funding for innovation and the exit of firms," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 519-543, August.
    8. Baldwin, John R. & Gellatly, Guy, 2006. "Innovation Capabilities: The Knowledge Capital Behind the Survival and Growth of Firms," The Canadian Economy in Transition 2006013e, Statistics Canada, Economic Analysis Division.
    9. Drolet, Marie & Morissette, Rene, 1998. "Recent Canadian Evidence on Job Quality by Firm Size," Analytical Studies Branch Research Paper Series 1998128e, Statistics Canada, Analytical Studies Branch.

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