Job Creation, Firm Creation, and De Novo Entry

54 Pages Posted: 23 Oct 2014

See all articles by Karen Geurts

Karen Geurts

Center for Economic Studies - KULeuven

Johannes Van Biesebroeck

K.U.Leuven; Centre for Economic Policy Research (CEPR)

Date Written: August 2014

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 GibratÂ’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 entrantsÂ’ 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.

Keywords: employment growth, firm dynamics, Gibrat's law

JEL Classification: E24, L16, L25

Suggested Citation

Geurts, Karen and Van Biesebroeck, Johannes, Job Creation, Firm Creation, and De Novo Entry (August 2014). CEPR Discussion Paper No. DP10118. Available at SSRN: https://ssrn.com/abstract=2513470

Karen Geurts (Contact Author)

Center for Economic Studies - KULeuven ( email )

Naamsestraat 69
Leuven, 3000
Belgium
+32478303283 (Phone)

Johannes Van Biesebroeck

K.U.Leuven ( email )

Naamsestraat 69
B-3000 Leuven
Belgium
+3216326793 (Phone)
+3216326796 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/public/N07057/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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