Junfu Zhang

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

We use the National Establishment Time Series (NETS) to revisit the debate about the role of small businesses in job creation (Birch, 1987; Davis, Haltiwanger, & Schuh, 1996a). 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 Birchs methods suggest. Moreover, in the recent period we study, a negative relationship between establishment size and net job creation holds for both the manufacturing and services sectors.

A DYNAMIC MODEL OF RESIDENTIAL SEGREGATION

Using dimes and pennies on a checkerboard, Schelling (1971, 1978) studied the link between residential preferences and segregational neighborhood patterns. While his approach clearly has methodological advantages in studying the dynamics of residential segregation, Schellings checkerboard model has never been rigorously analyzed. We propose an extension of the Schelling model that incorporates economic variables. Using techniques recently developed in stochastic evolutionary game theory, we mathematically characterize the models long-term dynamics.

Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series

We analyze and assess new evidence on employment dynamics from a new data source – the National Establishment Time Series (NETS). The NETS offers advantages over existing data sources for studying employment dynamics, including tracking business establishment relocations that can contribute to job creation or destruction on a regional level. Our primary purpose in this paper is to assess the reliability of the NETS data along a number of dimensions, and we conclude that it is a reliable data source although not without limitations. We also illustrate the usefulness of the NETS data by reporting, for California, a full decomposition of employment change into its six constituent processes, including job creation and destruction stemming from business relocation, which has figured prominently in policy debates but on which there has been no systematic evidence.

Tipping and Residential Segregation: A Unified Schelling Model

This paper presents a Schelling-type checkerboard model of residential segregation formulated as a spatial game. It shows that although every agent prefers to live in a mixed-race neighborhood, complete segregation is observed almost all of the time. A concept of tipping is rigorously defined, which is crucial for understanding the dynamics of segregation. Complete segregation emerges and persists in the checkerboard model precisely because tipping is less likely to occur to such residential patterns. Agent-based simulations are used to illustrate how an integrated residential area is tipped into complete segregation and why this process is irreversible. This model incorporates insights from Schellings two classical models of segregation (the checkerboard model and the neighborhood tipping model) and puts them on a rigorous footing. It helps us better understand the persistence of residential segregation in urban America.

Where the Jobs Are: Business Dynamics and Employment Growth

Executive Overview Jobs are created by births of new businesses, expansions of existing ones, and relocations of businesses into an economy. Conversely, jobs are destroyed by deaths and contractions of existing businesses, and outward relocations. To the extent that state and local policymakers directly address job creation and job destruction, they focus to a large extent on relocation – engaging in efforts to attract new businesses to a state or locality, and attempting to encourage existing businesses contemplating leaving to stay. However, the empirical evidence underlying this focus on relocation is virtually non-existent, as there has been no systematic evidence on the role of business relocation in job creation and destruction. This paper presents new evidence on the importance of each of these processes – births and deaths, expansions and contractions, and in- and out-migration – to employment growth (and decline). We use data from the National Establishment Time Series for California. The evidenc...

Growing Silicon Valley on a landscape: an agent-based approach to high-tech industrial clusters

We propose a Nelson-Winter model with an explicitly defined landscape to study the formation of high-tech industrial clusters such as those in Silicon Valley. The existing literature treats clusters as the result of location choices and focuses on how firms may benefit from locating in a cluster. We deviate from this tradition by emphasizing that high-tech industrial clusters are characterized by concentrated entrepreneurship. We argue that the emergence of clusters can be explained by the social effect through which the appearance of one or a few entrepreneurs inspire many followers locally. Agent-based simulation is employed to show the dynamics of the model. Data from the simulation and the properties of the model are discussed in light of empirical regularities. Variations of the model are simulated to study policies that are favorable to the high-tech economy.

Unaffordable Housing and Local Employment Growth: Evidence from California Municipalities

It is widely believed that unaffordable housing could drive businesses away and thus impede job growth. However, there is little evidence to support this view. This paper presents a simple model to clarify how housing affordability is linked to employment growth and why unaffordable housing could negatively affect employment growth. The paper then investigates this effect empirically using data on California municipalities. For various reasons, a simple correlation between unaffordable housing and employment growth cannot be interpreted as causal. Several empirical strategies are employed to identify the causal effect of unaffordable housing on employment growth. The estimation results provide consistent evidence that unaffordable housing indeed slows local employment growth.

Business Establishment Dynamics and Employment Growth

We present evidence on the contributions of business establishment dynamics - including births and deaths, expansions and contractions, and in- and out-migration - to employment growth (and decline). We use data from the National Establishment Time Series for California to estimate the contribution of each of these processes to employment growth. The evidence indicates that births of new business establishments and expansion of existing ones, coupled with their counterparts of deaths and contractions of existing establishments, are the prime determinants of employment growth. Business relocation, while often the focus of public debate regarding the business climate, plays a negligible role. Overall, business establishment births and deaths are the largest contributors to job creation and destruction, and births of new firms are particularly important in gross and net job creation.

Measuring the Stringency of Land-Use Regulation: The Case of China's Building-Height Limits

This paper develops a new approach for measuring the stringency of a major form of land use regulation, building height restrictions, and applies it to an extraordinary data set of land-lease transactions from China. Our theory shows that the elasticity of land price with respect to the floor area ratio (FAR), a building height indicator, is a measure of the regulations stringency (the extent to which FAR is kept below the free-market level). Using a national sample, estimation allowing this elasticity to be city-specific shows variation in the stringency of FAR regulation across Chinese cities. Single-city estimation for Beijing shows that stringency varies with site characteristics.