Entrepreneurship and Job Growth

This analysis attempts to place existing research about job growth among young, small firms in the context of productivity dynamics. Most research to date has relied on U.S. manufacturing data; this study, however, takes advantage of tabulations from recent, economy-wide datasets.

These datasets use the Longitudinal Business Database (LBD) and the Integrated LBD, which is an extended version of the LBD. Both datasets incorporate the role of non-employer businesses (i.e. businesses that do not yet employ workers) into the job growth dynamics of U.S. businesses.
A review and analysis of the job growth literature from a productivity dynamics perspective reveals that young businesses have much higher net growth and much higher volatility than mature firms. The data also indicate that publicly traded firms exhibit higher net growth and less volatility than privately held businesses and that there has been a decline in overall firm volatility in the U.S. over the last couple of decades.



Finally, a significant fraction of young employer firms have a pre-history as non-employer firms. As a whole, the findings suggest that U.S. business dynamics are characterized by constant change and that young firms exhibit rapid net growth and high volatility.

Download the working paper by John Haltiwanger here.