Job Creation in Colombia vs the U.S.: 'Up or Out Dynamics' Meets 'the Life Cycle of Plants'

45 Pages Posted: 14 Feb 2019

See all articles by Marcela Eslava

Marcela Eslava

University of the Andes (CEDE)

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Alvaro-Jose Pinzon G.

Universidad de los Andes, Colombia - Department of Economics

Date Written: February 11, 2019

Abstract

Following the seminal work of Hsieh and Klenow (2014), there is growing consensus that a key difference between the U.S. and developing economies is that the latter exhibit slower employment growth over the life cycle of the average productive establishment. At the same time, the distribution of startup employment growth in the U.S. is highly skewed, with extraordinary growth establishments driving average employment growth, giving rise to the "up or out dynamics" label (Haltiwanger, Jarmin and Miranda, 2013). We look at the entire population of non-micro manufacturing establishments in Colombia vs. the US and find that slower average life cycle growth in Colombia is driven by a less enthusiastic contribution of extraordinary growth plants and less dynamic selection of young underperforming plants. As a consequence, the size distribution of non-micro plants exhibits more concentration in small-old plants in Colombia, both in unweighted and employment-weighted bases. These findings point to a shortage of high-growth entrepreneurship and a relatively high likelihood of long-run survival for small, likely unproductive plants, as two key elements at the heart of the development problem. An extreme concentration of resources in micro plants is the other distinguishing feature of the Colombian manufacturing sector vis a vis the US'.

Keywords: entrepreneurship; SMEs; employment growth

JEL Classification: O47; O14

Suggested Citation

Eslava, Marcela and Haltiwanger, John C. and Pinzon G., Alvaro-Jose, Job Creation in Colombia vs the U.S.: 'Up or Out Dynamics' Meets 'the Life Cycle of Plants' (February 11, 2019). Documento CEDE No. 2019-07. Available at SSRN: https://ssrn.com/abstract=3334528 or http://dx.doi.org/10.2139/ssrn.3334528

Marcela Eslava (Contact Author)

University of the Andes (CEDE) ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Alvaro-Jose Pinzon G.

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

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