Job creation, firm creation, and de novo entry

Karen Geurts and Johannes Van Biesebroeck

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: Firm turnover and growth recorded in administrative data sets differ from underlying firm dynamics. By tracing the employment history of the workforce of new and disappearing administrative firm identifiers, we can accurately identify de novo entrants and true economic exits, even when firms change identifier, merge, or split-up. For a well-defined group of new firms entering the Belgian economy between 2004 and 2011, we find highly regular post-entry employment dynamics in spite of the volatile macroeconomic environment. Exit rates decrease with age and size. Surviving entrants record high employment growth that is monotonically decreasing with age in every size class. Most remarkably, we find that Gibrat’s law is violated for very young firms. Conditional on age, the relationship between employment growth and current size is strongly and robustly positive. This pattern is obscured, or even reversed, when administrative entrants and exits are taken at face value. De novo entrants’ contribution to job creation is relatively small and not very persistent, in particular for (the large majority of) new firms that enter with fewer than five employees.

Date: 2014-08
New Economics Papers: this item is included in nep-bec, nep-ent, nep-ger, nep-sbm and nep-tid
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Firm creation and post-entry dynamics of de novo entrants (2016)
Working Paper: Job creation, firm creation, and de novo entry (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces14.25

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