Are small employers more cyclically sensitive? Evidence from Brazil

Túlio Cravo

Journal of Macroeconomics, 2011, vol. 33, issue 4, 754-769

Abstract: An important issue facing policymakers is the degree to which fluctuations in economic activity affect employment in large and small businesses across sectors and regions. This issue is particularly relevant for developing countries as it matters for the understanding of the labour market dynamics, and for devising national, sectoral, and regional labour policies that aim at dampening employment fluctuations, particularly during recessions. Using a unique monthly dataset of 27 states and eight industries from 2000:1 to 2009:7, this paper evaluates the sensitivity of businesses of different sizes to business cycle conditions in Brazil. The behaviour of the difference in employment growth rates between large and small firms is counter-cyclical and suggests that small firms are more sensitive to business cycle conditions. In addition, the SVAR impulse response analysis suggests the existence of the effect of small firms hiring cheaply from unemployment proportionally more than large ones. On the other hand, credit constraints seem to hit small firms harder and help to explain the empirical regularity that small firms are more cyclically sensitive than large ones for the Brazilian case.

Keywords: Firm size; Jobs flows; Business cycles; Market structure (search for similar items in EconPapers)
JEL-codes: E32 J21 J40 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:33:y:2011:i:4:p:754-769

DOI: 10.1016/j.jmacro.2011.06.003

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