Job Creation, Job Destruction and the Role of Small Firms: Firm-Level Evidence for the UK

University of Nottingham Research Paper No. 2007/01

25 Pages Posted: 11 Jan 2007

See all articles by Alexander Hijzen

Alexander Hijzen

Organization for Economic Co-Operation and Development (OECD)

Richard Upward

University of Nottingham - School of Economics

Peter W Wright

University of Sheffield - Department of Economics

Multiple version iconThere are 2 versions of this paper

Abstract

Evidence on job creation and destruction for the UK is still limited compared to that available from other countries. What evidence there is refers almost entirely to the manufacturing sector, with the most recent figures referring to the 1980s. There are therefore no recent estimates for the great majority of firms in the UK. In this paper we use firm-level data from 1997-2005 to calculate job creation and destruction rates for almost all sectors, including services. We show that firms in the service sector exhibit much higher rates of job creation and slightly higher rates of job destruction. One-third of new jobs are created by the entry of new firms, while half of lost jobs are destroyed by the exit of firms. Small firms (those with fewer than 100 employees) account for a disproportionately large fraction of job creation and destruction relative to their share of employment. This finding is robust to the definition of firm size used.

Keywords: Job creation, job destruction, small firms

JEL Classification: J21, J23, J63

Suggested Citation

Hijzen, Alexander and Upward, Richard and Wright, Peter W, Job Creation, Job Destruction and the Role of Small Firms: Firm-Level Evidence for the UK. University of Nottingham Research Paper No. 2007/01, Available at SSRN: https://ssrn.com/abstract=956596 or http://dx.doi.org/10.2139/ssrn.956596

Alexander Hijzen (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

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Paris Cedex 16, 75775
France

Richard Upward

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 5151 (Phone)
+44 115 951 4159 (Fax)

Peter W Wright

University of Sheffield - Department of Economics ( email )

9 Mappin Street
Sheffield, S1 4DT
UNITED KINGDOM

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