The start-up gap and jobs
- PDF / 942,025 Bytes
- 18 Pages / 547.087 x 737.008 pts Page_size
- 38 Downloads / 190 Views
The start-up gap and jobs Shyngys Karimov
&
Jozef Konings
Accepted: 6 August 2020 # Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract The present paper uses quarterly data from the social security registry covering the full population of Belgian firms to analyze how the secular decline in the firm entry rate affects aggregate employment. To this end, we disentangle the entry margin into two channels: the overall employment of new firms (the start-up employment) and the share of start-up employment by sector (the sectoral composition of start-ups). We find that the decline in start-up employment slowed down the growth rate of aggregate employment by 26% over the 2009Q2– 2017Q1 period by shifting the age distribution of firms toward older firms. The sectoral composition of start-ups accelerated the decline in the manufacturing sector and prevented the distribution sector from a potential decline, while leaving the aggregate employment unchanged. This work has benefited from the presentations at VIVES, Barcelona Graduate School of Economics (EARIE 2019) and University of Michigan (CAED 2019). S. Karimov (*) : J. Konings VIVES, Department of Economics, University of Leuven (KU Leuven), Leuven, Belgium e-mail: [email protected]
J. Konings e-mail: [email protected] J. Konings CEPR, London, UK J. Konings Economics Group, University of Liverpool Management School, Liverpool, UK
Keywords Startup . New firm growth . Firm growth . Employment JEL classification L26 . M13 . E24 . D22
1 Introduction In recent years, entry of new firms and the prevalence of high-growth firms have been declining. Decker et al. (2016) document declining business dynamism in the US and suggest that it is driven by the increased product and labor market regulations. However, this pattern is not just seen in the US. Bijnens and Konings (2018) document similar trends for Belgium, a small open economy with highly regulated labor markets, and suggest that global trends are at the basis of this decline.1 Akcigit and Ates (2019) explain the declining business dynamism in the US by the declining intensity of knowledge diffusion from the frontier firms to the laggard ones. The creation and destruction of jobs and firms facilitate the reallocation of resources from inefficient to efficient use, and hence promote aggregate growth. Therefore, this decline in business dynamism has raised concerns about its impact on productivity growth and overall macroeconomic performance (Alon et al. 2018; Decker et al. 2017, 2018). Particularly striking has been the slowdown in firm entry during the last couple of decades. While there has been a lot of work emphasizing 1
Calvino and Criscuolo (2019) document declining business dynamism for major OECD economies and highlight that it is more pronounced in digital intensive sectors.
S. Karimov, J. Konings
the role of firm entry for innovation and the process of creative destruction in general (Acemoglu and Cao 2015; Aghion et al. 2009, 2014), little is known about how much th
Data Loading...
