Small Business and Job Creation: Dissecting the Myth and Reassessing Thefacts

49 Pages Posted: 29 Dec 2003

See all articles by Steven J. Davis

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER)

John Haltiwanger

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

Scott D. Schuh

Federal Reserve Bank of Boston - Research Department

Date Written: October 1993

Abstract

This paper investigates how job creation and destruction behavior varies by employer size in the U.S. manufacturing sector during the period 1972 to 1988. The paper also evaluates the empirical basis for conventional claims about the job-creating prowess of small businesses. The chief findings and conclusions fall into five categories: (1) Conventional wisdom about the job-creating prowess of small businesses rests on misleading interpretations of the data. (2) Many previous studies of the job creation process rely upon data that are not suitable for drawing inferences about the relationship between employer size and job creation. (3) Large plants and firms account for most newly-created and newly- destroyed manufacturing jobs. (4) Survival rates for new and existing manufacturing jobs increase sharply with employer size. (5) Smaller manufacturing firms and plants exhibit sharply higher gross rates of job creation but not higher net rates.

Suggested Citation

Davis, Steven J. and Haltiwanger, John C. and Schuh, Scott, Small Business and Job Creation: Dissecting the Myth and Reassessing Thefacts (October 1993). NBER Working Paper No. w4492. Available at SSRN: https://ssrn.com/abstract=420303

Steven J. Davis (Contact Author)

University of Chicago ( email )

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John C. Haltiwanger

University of Maryland - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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

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Scott Schuh

Federal Reserve Bank of Boston - Research Department ( email )

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Boston, MA 02210
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617-973-3941 (Phone)
617-619-7541 (Fax)

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