International Evidence that Young Firms Create Most Jobs

(p. 252) Chiara Criscuolo, Peter N. Gal, and Carlo Menon compile empirical evidence concerning “The Dynamics of Employment Growth: New Evidence from 18 Countries.” “[N]ot all small businesses are net job creators, showing that only young businesses–predominantly small–create a disproportionate number of jobs, confirming recent evidence for the United States. When disentangling the role of entry from the role of expansion of incumbent young firms, the data clearly shows that entry explains most of the contribution to job creation, followed by startups (i.e., firms that are less than three year old). While this remains true even during the recent great recession, the data shows a sharp decline in the contribution of entry and young firms to aggregate employment growth during the recession. More generally, the findings point to a decline in start-up rates over the past decade across all countries considered, which gives cause for concern, given their strong contribution to job creation.” OECD Science, Technology and Industry Policy Papers No. 14, May 21, 2014. http://www.oecd-ilibrary.org/science-and-technology/the-dynamics-of-employment-growth_5jz417hj6hg6-en.

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.
(Note: bracketed letter in original.)

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