Business Establishment Dynamics and Employment Growth

40 Pages Posted: 17 Jun 2006 Last revised: 22 Oct 2007

See all articles by David Neumark

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Junfu Zhang

Clark University; IZA Institute of Labor Economics

Brandon Wall

Public Policy Institute of California; Stanford University

Date Written: November 2005

Abstract

We present evidence on the contributions of business establishment dynamics - including births and deaths, expansions and contractions, and in- and out-migration - to employment growth (and decline). We use data from the National Establishment Time Series for California to estimate the contribution of each of these processes to employment growth. The evidence indicates that births of new business establishments and expansion of existing ones, coupled with their counterparts of deaths and contractions of existing establishments, are the prime determinants of employment growth. Business relocation, while often the focus of public debate regarding the business climate, plays a negligible role. Overall, business establishment births and deaths are the largest contributors to job creation and destruction, and births of new firms are particularly important in gross and net job creation.

Suggested Citation

Neumark, David and Zhang, Junfu and Wall, Brandon, Business Establishment Dynamics and Employment Growth (November 2005). Hudson Institute Research Paper No. 05-02, Available at SSRN: https://ssrn.com/abstract=909249 or http://dx.doi.org/10.2139/ssrn.909249

David Neumark (Contact Author)

University of California, Irvine - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Junfu Zhang

Clark University ( email )

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IZA Institute of Labor Economics

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Germany

Brandon Wall

Public Policy Institute of California ( email )

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Stanford University ( email )

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