Small Versus Large Firms Employment Patterns in Finland: a Comparison.

Fornaro, Paolo and Luomaranta, Henri (2015): Small Versus Large Firms Employment Patterns in Finland: a Comparison.

Abstract

In this paper, we use monthly employment data of Finnish firms to examine the differences in the employment behavior between big and small enterprises. In particular, we investigate which size class of firms has been growing more, which one has been the driver of net job creation and finally which type of enterprise has been more procyclical. In line with previous literature, we utilize various definitions to include a firm inside the small or large category, and consider both one dataset including entry and exit and one including only long-lasting firms. We find that small firms have shown higher growth rates, on average, and that they have been the driver of employment creation. Finally, we find that large firms are more procyclical than small enterprises, especially during economic contractions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Firm-level data, Large datasets, Employment statistics
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J63 - Turnover ; Vacancies ; Layoffs; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L26 - Entrepreneurship

References

Michael Anyadike-Danes, Carl-Magnus Bjuggren, Sandra Gottschalk, Werner Holzl, Dan Johansson, Mika Maliranta, and Anja Myrann. An international cohort comparison of size effects on job growth. Technical report, 2014.

Jushan Bai and Serena Ng. Determining the Number of Factors in Approximate Factor Models. Econometrica, 70(1):191–221, January 2002.

Petri Böckerman and Mika Maliranta. Globalization, creative destruction, and labour share change: evidence on the determinants and mechanisms from longitudinal plant-level data. Oxford Economic Papers, 64(2):259–280, 2012.

David L. Birch. Who Creates Jobs? Public Interest, 65(3):3–14, 1981. Jose L. Calvo. Testing gibrat’s law for small, young and innovating firms. Small Business Economics, 26(2):117–123, 2006.

Steven J Davis, John Haltiwanger, and Scott Schuh. Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts. Small Business Economics, 8(4): 297–315, August 1996.

Catherine Doz, Domenico Giannone, and Lucrezia Reichlin. A Quasi–Maximum Likelihood Approach for Large, Approximate Dynamic Factor Models. The Review of Economics and Statistics, 94(4):1014–1024, November 2012.

Andrew T. Foerster, Pierre-Daniel G. Sarte, and Mark W. Watson. Sectoral versus Aggregate Shocks: A Structural Factor Analysis of Industrial Production. Journal of Political Economy, 119(1):1 – 38, 2011.

Xavier Gabaix. The Granular Origins of Aggregate Fluctuations. Econometrica, 79(3): 733–772, 05 2011.

Robert Gibrat. Les inegalites economiques; applications aux inegalites des richesses, a la concentration des entreprises, aux populations des villes, aux statistiques des familles, etc., d’une loi nouvelle, la loi de l’effet proportionnel. 1931.

John Haltiwanger, Ron S. Jarmin, and Javier Miranda. Who Creates Jobs? Small versus Large versus Young. The Review of Economics and Statistics, 95(2):347–361,May 2013.

Satu Hohti. Job flows and job quality by establishment size in the finnish manufacturing sector 1980-94., 2000.

Pekka Ilmakunnas and Mika Maliranta. The turnover of jobs and workers in a deep recession: evidence from the finnish business sector. International Journal of Manpower, 24(3):216–246, 2003.

Tomi Kyyra and Mika Maliranta. The micro-level dynamics of declining labour share: lessons from the Finnish great leap. Industrial and Corporate Change, 17(6):1147–1172, December 2008.

Francesca Lotti, Enrico Santarelli, and Marco Vivarelli. Defending Gibrat’s Law as a long-run regularity. Small Business Economics, 32(1):31–44, January 2009.

Agustin Maravall. An application of the TRAMO-SEATS automatic procedure; direct versus indirect adjustment. Computational Statistics & Data Analysis, 50(9):2167– 2190, May 2006.

Giuseppe Moscarini and Fabien Postel-Vinay. The Contribution of Large and Small Employers to Job Creation in Times of High and Low Unemployment. American Economic Review, 102(6):2509–39, October 2012.

David Neumark, Brandon Wall, and Junfu Zhang. Do Small Businesses Create More Jobs? New Evidence for the United States from the National Establishment Time Series. The Review of Economics and Statistics,93(1):16–29, August 2011.

Enrico Santarelli, Luuk Klomp, and A.Roy Thurik. Gibrat’s law: An overview of the empirical literature. In Enrico Santarelli, editor, Entrepreneurship, Growth, and Innovation, volume 12 of International Studies in Entrepreneurship, pages 41–73. Springer US, 2006.

Robert Shimer. Reassessing the Ins and Outs of Unemployment. Review of Economic Dynamics, 15(2):127–148, April 2012.

Andrea Stella. Firm dynamics and the origins of aggregate fluctuations. November 2014.

John H. Stock and Mark W. Watson. Forecasting Using Principal Components From a Large Number of Predictors. Journal of the American Statistical Association, 97: 1167–1179, December 2002.

John Sutton. Gibrat’s Legacy. Journal of Economic Literature, 35(1):40–59, March 1997.

Gerrit Wit and Jan Kok. Do small businesses create more jobs? New evidence for Europe. Small Business Economics, 42(2):283–295, February 2014.