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Assessing Job Flows across Countries: The Role of Industry, Firm Size and Regulations

John Haltiwanger, Stefano Scarpetta () and Helena Schweiger

No 2450, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: This paper reviews the process of job creation and destruction across a sample of 16 industrial and emerging economies over the past decade. It exploits a harmonized firm-level data-set drawn from business registers and enterprise census data. The paper assesses the importance of technological factors that characterize different industries in explaining cross-country differences in job flows. It shows that industry effects play an important role in shaping job flows at the aggregate level. Even more importantly, differences in the size composition of firms – within each industry – explain a large fraction of the overall variability in job creation and destruction. However, even after controlling for industry/technology and size factors there remain significant differences in job flows across countries that could reflect differences in business environment conditions. In this paper, we look at one factor shaping the business environment, namely, regulations on hiring and firing of workers. To minimize possible endogeneity and omitted variable problems associated with cross-country regressions, we use a difference-in-difference approach. The empirical results suggest that stringent hiring and firing costs reduce job turnover, especially in those industries that require more frequent labor adjustment. Regulations also distort the patterns of industry/size flows. Within each industry, medium and large firms are more severely affected by stringent labor regulations, while small firms are less affected, probably because they are partially exempted from such regulations or can more easily circumvent them.

Keywords: gross job flows; firm dynamics; firm size; product and labor market regulations; firm-level data (search for similar items in EconPapers)
JEL-codes: J23 J53 K31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law and nep-reg
Date: 2006-11
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Published as 'Cross country differences in job reallocation: The role of industry, firm size and regulations' in: Labour Economics, 2014, 26, 11-25

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Related works:
Working Paper: Assessing Job Flows Across Countries: The Role of Industry, Firm Size and Regulations (2008) Downloads
Working Paper: Assessing job flows across countries: the role of industry, firm size, and regulations (2006) Downloads
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