Assessing Job Flows Across Countries: The Role of Industry, Firm Size, and Regulations

54 Pages Posted: 20 Apr 2016

See all articles by John Haltiwanger

John Haltiwanger

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

Stefano Scarpetta

OECD, Directorate for Employment, Labour and Social Affairs; IZA Institute of Labor Economics

Helena Schweiger

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist

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Date Written: November 2006

Abstract

This paper reviews the process of job creation and destruction across a sample of 16 industrial and emerging economies over the past decade. It exploits a harmonized firm-level data set drawn from business registers and enterprise census data. The paper assesses the importance of technological factors that characterize different industries in explaining cross-country differences in job flows. It shows that industry effects play an important role in shaping job flows at the aggregate level. Even more importantly, differences in the size composition of firms - within each industry - explain a large fraction of the overall variability in job creation and destruction. However, even after controlling for industry/technology and size factors there remain significant differences in job flows across countries that could reflect differences in business environment conditions. The authors look at one factor shaping the business environment, namely, regulations on hiring and firing of workers. To minimize possible endogeneity and omitted variable problems associated with cross-country regressions, we use a difference-in-difference approach. The empirical results suggest that stringent hiring and firing costs reduce job turnover, especially in those industries that require more frequent labor adjustment. Regulations also distort the patterns of industry/size flows. Within each industry, medium and large firms are more severely affected by stringent labor regulations, while small firms are less affected, probably because they are partially exempted from such regulations or can more easily circumvent them.

Keywords: Labor Markets, Small Scale Enterprise, Microfinance, Inequality, Water and Industry

Suggested Citation

Haltiwanger, John C. and Scarpetta, Stefano and Schweiger, Helena, Assessing Job Flows Across Countries: The Role of Industry, Firm Size, and Regulations (November 2006). World Bank Policy Research Working Paper No. 4070; IZA Discussion Paper No. 2450. Available at SSRN: https://ssrn.com/abstract=946306

John C. Haltiwanger (Contact Author)

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 )

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

P.O. Box 7240
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Germany

Stefano Scarpetta

OECD, Directorate for Employment, Labour and Social Affairs ( email )

2 rue Andre Pascal
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France
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+33 1 45 24 18 59 (Fax)

IZA Institute of Labor Economics

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

Helena Schweiger

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist ( email )

One Exchange Square
London EC2A 2JN
United Kingdom

HOME PAGE: http://www.helenasch.net

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