Working Paper: NBER ID: w14740
Authors: Giuseppe Moscarini; Fabien Postel-Vinay
Abstract: We provide new evidence that large firms or establishments are more sensitive than small ones to business cycle conditions. Larger employers shed proportionally more jobs in recessions and create more of their new jobs late in expansions, both in gross and net terms. We employ a variety of measures of relative employment growth, employer size and classification by size, and a variety of U.S. datasets, both repeated cross-sections and job flows with employer longitudinal information, starting in the mid 1970's and now spanning four business cycles. We revisit two statistical fallacies, the Regression and Reclassification biases, and show empirically that they are quantitatively modest given our focus on relative cyclical behavior. The differential growth rate of employment between large (>1000 employees) and small (<50) firms varies by about 5% over the business cycle, and is strongly negatively correlated with the unemployment rate. This pattern occurs within, not across broad industries, regions and states, and is robust to different treatments of entry and exit. It appears to be partly driven by excess (mass) layoffs by large employers during and just after recessions, and by excess poaching by large employers late in expansions. We find the same qualitative pattern in longitudinal censuses of employers from Denmark and Brazil, and in other countries. Finally, we sketch a simple firm-ladder model of turnover that can shed light on these facts, and that we analyze in detail in companion papers.
Keywords: Employment; Cyclical Sensitivity; Large Employers; Small Employers; Business Cycles
JEL Codes: E24; E32; J23; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large employers (J59) | more cyclically sensitive (E32) |
| unemployment rate (J64) | job losses for large employers (J63) |
| large employers (J59) | job gains late in expansions (J20) |
| large employers (J59) | destroy proportionally more jobs during recessions (J68) |
| large employers (J59) | create proportionally more jobs after recessions (J68) |
| size of employer (L25) | cyclical sensitivity (E32) |
| job flows and employment stocks (J60) | cyclical behavior of large employers (E32) |
| initial size of employer (J23) | one-year ahead growth rate of employment (O49) |