Work

Do Small Businesses Create More Jobs? New Evidence for the United States from the National Establishment Time Series

Year: 2010

Type: article

Abstract: We use a new database, the National Establishment Time Series (NETS), to revisit the debate about the role of small businesses in job creation. Birch (e.g., 1987) argued that small firms are the most important source of job creation in the U.S. economy. But Davis et al. (1996a) argued that this conclusion was flawed, and based on improved methods and using data for the manufacturing sector, they concluded that there was no relationship between establishment size and net job creation. Using the NETS data, we examine evidence for the overall economy, as well as for different sectors. The results indicate that small firms and small establishments create more jobs, on net, although the difference is much smaller than what is suggested by Birch's methods. Moreover, in the recent period we study, a negative relationship between establishment size and job creation holds for both the manufacturing and services sectors.

Source: The Review of Economics and Statistics

DOI: 10.1162/rest_a_00060

Authors: David Neumark, Brandon Wall, Junfu Zhang

Institutions: Public Policy Institute of California, University of California, Irvine, KIPP Foundation, Stanford University, Clark University

Language: English

Topic: Firm Innovation and Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

Funders: Ewing Marion Kauffman Foundation, Rheinische Friedrich-Wilhelms-Universität Bonn