Have Small Firms Created a Disproportionate Share of New Jobs in Canada?: A Reassessment of the Facts

Statistics Canada Working Paper 71

34 Pages Posted: 7 Aug 1996

See all articles by Garnett Picot

Garnett Picot

Statistics Canada

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division

Richard Dupuy

Statistics Canada

Date Written: November 1994

Abstract

The statistical observation that small firms have created the majority of new jobs during the 1980s has had a tremendous influence on public policy. Governments have looked to the small firm sector for employment growth and have promoted policies to augment this expansion. However, recent research in the U.S. suggests that net job creation in the small firm sector may have been overestimated, relative to that in large firms. This paper addresses various measurement issues raised in the recent research and uses a very unique Canadian longitudinal data set that encompasses all companies in the Canadian economy to reassess the issue of job creation by firm size. We conclude that over the 1978-92 period, for both the entire Canadian economy and the manufacturing sector, the growth rate of (net) employment decreases monotonically as the size of firm increases, no matter which method of sizing firms is used. The small firm sector has accounted for a disproportionate share of both gross job gains and job losses and, in that aggregate, accounted for a disproportionate share of the employment increase over the period. Measurement does matter, however, as the magnitude of the difference in the growth rates of small and large firms is very sensitive to the measurement approaches used. The paper also produces results for various industrial sectors, asks whether the more rapid growth in industries with a high proportion of small firms is responsible for the findings at the all-economy level, and examines employment growth in existing small and large firms (i.e., excluding births). It is found that employment growth in the population of existing small and large firms is very similar.

JEL Classification: J23, E24

Suggested Citation

Picot, Garnett and Baldwin, John R. and Dupuy, Richard, Have Small Firms Created a Disproportionate Share of New Jobs in Canada?: A Reassessment of the Facts (November 1994). Statistics Canada Working Paper 71, Available at SSRN: https://ssrn.com/abstract=3231 or http://dx.doi.org/10.2139/ssrn.3231

Garnett Picot (Contact Author)

Statistics Canada ( email )

Ottawa, Ontario
Canada
613-951-8214 (Phone)
613-951-5403 (Fax)

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada
613-951-8588 (Phone)
613-951-5403 (Fax)

Richard Dupuy

Statistics Canada

Ottawa, Ontario
Canada

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