Business dynamics and employment growth: a cross-country analysis

Arbeitspapier

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 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 significant 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Papers on Entrepreneurship, Growth and Public Policy ; No. 3204

Classification and Topics

• Classification: Wirtschaft ; New Firms; Startups ; Market Structure, Firm Strategy, and Market Performance: General ; Comparative Studies of Countries ; Labor Demand
• Subject: business dynamics ; employment growth ; enterpreneurship ; Markteintritt ; Marktaustritt ; Beschäftigungseffekt ; Verarbeitendes Gewerbe ; Unternehmensdienstleistung ; Belgien ; Dänemark ; Deutschland ; Japan ; Niederlande ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): van Stel, André J. ; Diephuis, Bart
• Event: Veröffentlichung
• (who): Max Planck Institute for Research into Economic Systems
• (where): Jena
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/19977
• Last update: 10.03.2025, 11:44 AM CET