John Haltiwanger

Who Creates Jobs? Small versus Large versus Young

The view that small businesses create the most jobs remains appealing to policymakers and small business advocates. Using data from the Census Bureaus Business Dynamics Statistics and Longitudinal Business Database, we explore the many issues at the core of this ongoing debate. We find that the relationship between firm size and employment growth is sensitive to these issues. However, our main finding is that once we control for firm age, there is no systematic relationship between firm size and growth. Our findings highlight the important role of business start-ups and young businesses in U.S. job creation.

Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications

This paper investigates the connection between the heterogeneity of establishment-level employment changes and aggregate fluctuations at business cycle frequencies. Our empirical work exploits a rich data set with approximately 860,000 annual observations and 3.4 million quarterly observations on 160,000 manufacturing establishments to calculate rates of gross job creation, gross job destruction, and their sum, gross job reallocation. Three central messages emerge from the research in this paper: First, establishment-level employment changes exhibit tremendous heterogeneity, even within narrowly defined sectors of the economy. This heterogeneity manifests itself in terms of high rates of gross job creation, destruction, and reallocation. Furthermore, the magnitude of this heterogeneity varies significantly over time; most of the variation is due to time variation in the idiosyncratic component of establishment growth rates, and the variation is significantly countercyclical. Second, our theoretical model of employment reallocation and business cycles is suggestive of how both aggregate and allocative disturbances can drive fluctuations in job creation, job destruction, unemployment, productivity, and output. Third, our empirical analysis of the joint dynamics of job creation and destruction supports the view that allocative disturbances were a major driving force behind movements in job creation, job destruction, job reallocation, and net employment growth in the U.S. manufacturing sector during the 1972 to 1986 period.

Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries

In this paper the authors provide an analysis of the process of creative destruction across 24 countries and 2-digit industries over the past decade. They rely on a newly assembled dataset that draws from different micro data sources (business registers, census, or representative enterprise surveys). The novelty of their approach is in the harmonization of firm-level data across countries, which enables international comparisons and the identification of country-specific factors as opposed to sector and time effects. All countries display a massive reallocation of resources, with the entry and exit of many firms in all markets, the failure of many newcomers and the expansion of successful ones. This process of creative destruction affects productivity directly by reallocating resources toward more productive uses, but also indirectly through the effects of increased market contestability. There are also large differences across groups of countries. While entry and exit rates are fairly similar across industrial countries, post-entry performance differs markedly between Europe and the United States, a potential indication of the importance of barriers to firm growth as opposed to barriers to entry. Transition economies show an even more impressive process of creative destruction and, those that have progressed the most toward a market economy show better outcomes from this process. Finally, Mexico shows large firm dynamics with many new firms entering the battle but also many failing rapidly, while Argentina resembles Continental Europe with smaller flows and less impressive post-entry growth of successful firms.

Small Business and Job Creation: Dissecting the Myth and Reassessing Thefacts

This paper investigates how job creation and destruction behavior varies by employer size in the U.S. manufacturing sector during the period 1972 to 1988. The paper also evaluates the empirical basis for conventional claims about the job-creating prowess of small businesses. The chief findings and conclusions fall into five categories:(1)Conventional wisdom about the job-creating prowess of small businesses rests on misleading interpretations of the data.(2)Many previous studies of the job creation process rely upon data that are not suitable for drawing inferences about the relationship between employer size and job creation.(3)Large plants and firms account for most newly-created and newly-destroyed manufacturing jobs.(4)Survival rates for new and existing manufacturing jobs increase sharply with employer size.(5)Smaller manufacturing firms and plants exhibit sharply higher gross rates of job creation but not higher net rates.

MARKET SELECTION, REALLOCATION, AND RESTRUCTURING IN THE U.S. RETAIL TRADE SECTOR IN THE 1990S

The U.S. retail trade sector underwent a massive restructuring and reallocation of activity in the 1990s with accompanying technological advances. Using a data set of establishments in that sector, we quantify and explore the relationship between this restructuring and reallocation and labor productivity dynamics. We find that virtually all of the labor productivity growth in the retail trade sector is accounted for by more productive entering establishments displacing much less productive exiting establishments. The productivity gap between low-productivity exiting single-unit establishments and entering high-productivity establishments from large, national chains plays a disproportionate role in these dynamics.

Wage Dispersion between and within U.S. Manufacturing Plants, 1963-1986

This paper exploits a rich and largely untapped source of information on the wages and other characteristics of individual manufacturing plants to cast new light on recent changes in the United States wage structure. Our primary data source, the Longitudinal Research Datafile (LRD) , contains observations on more than 300,000 manufacturing plants during Census years (1963, 1967, 1972, 1977, 1982) and 50,000-70,000 plants during intercensus years since 1972. We use the information in the LRD to investigate changes in the plant-wage structure over the past three decades. We also combine plant-level wage observations in the LRD with wage observations on individual workers in the Current Population Survey (CPS) to estimate the between-plant and within-plant components of overall wage dispersion.

Sectoral job creation and destruction responses to oil price changes

A fishing reel comprises a spool mounted between two connected together flanges and a crank for turning the spool projects outwardly from one of the flanges, the crank is provided with a bell-shaped housing therein and a variably set torque limiting device interconnecting the crank and spool is disposed in the housing. The torque limiting device comprises a disc clutch assembly having a plurality of friction washers disposed between bearing surfaces connected to both the crank and a gear system for rotating the spool. The torque limiting device is variably set by the user to effect slippage therein at any desired torque value resulting in relative rotation between the crank and the spool. In addition, the torque limiting device is contained in a cartridge and is removably mounted in the fishing reel assembly.

Downsizing and Productivity Growth: Myth or Reality?

The conventional wisdom is that the rising productivity in the U.S. manufacturing sector in the 1980s has been driven by the apparently pervasive downsizing over this period. Aggregate evidence clearly shows falling employment accompanying the rise in productivity. In this paper, we examine the microeconomic evidence using the plant level data from the Longitudinal Research Database (LRD). In contrast to the conventional wisdom, we find that plants that increased employment as well as productivity contribute almost as much to overall productivity growth in the 1980s as the plants that increased productivity at the expense of employment. Further, there are striking differences by sector (defined by industry, size, region, wages, and ownership type) in the allocation of plants in terms of whether they upsize or downsize and whether they increase or decrease productivity. Nevertheless, in spite of the striking differences across sectors defined in a variety of ways, most of the variance of productivity and employment growth is accounted for by idiosyncratic factors.

Labor Productivity: Structural Change and Cyclical Dynamics

A longstanding issue in empirical economics is the behavior of average labor productivity over the business cycle. This paper provides new insights into the cyclicality of aggregate labor productivity by examining the cyclical behavior of productivity at the plant level as well as the role of reallocation across plants over the cycle. We find that plant-level productivity is even more procyclical than aggregate productivity, because short-run reallocation yields a countercyclical contribution to labor productivity. At the plant level, we find that cyclicality of productivity varies systematically with long-run employment growth. Over the course of the cycle, plants that are long-run downsizers exhibit significantly greater procyclicality of productivity than do long-run upsizers. When we control for the direction of a cyclical shock, we find that the fall in productivity from an adverse cyclical shock for long-run downsizers is significantly larger in magnitude than is the fall in productivity from an equivalent adverse cyclical shock for long-run upsizers. We argue that these findings raise questions about one of the most popular explanations of procyclical productivity: changing factor utilization over the cycle.

Gross Worker and Job Flows in a Transition Economy: An Analysis of Estonia

With the transition in Estonia, worker flows increased greatly, driven by an increase in job flows. As the situation stabilized, the job and worker flows converged at rates similar to those observed in Western economies. In 1989, job reallocation accounted for only a small fraction of overall worker reallocation, which was less than 15 percent. By 1993, the worker reallocation rate exceeded 35 percent, more than two-thirds of it attributable to job reallocation. The dramatic increase in job flows was the result of increased separations, as jobs were eliminated. In 1992, early in the transition, the situation looked ominous but in only a couple of years new jobs and hires surged as well. By 1994, the hiring rate exceeded the separation rate, and jobs were being created faster thanthey were being eliminated. Increased job and worker reallocations did not affect all sectors or types of employee the same way. More jobs were eliminated in large state manufacturing firms and more jobs were created by smaller, private service, and trade-oriented employers. Virtually all of the new jobs came from the private sector (although many jobs were eliminated there, too). The elimination of so many jobs accounted for about half the increase in direct job-to-job transitions (from less than 5 percent in 1989 to 15 percent in 1994). Opening product and labor markets in Estonia led to a remarkable surge in worker and job flows. Early in the transition so many jobs were eliminated that things looked ominous, but within a couple years small private firms led the surge in new jobs and hiring.