Working Paper: NBER ID: w1951
Authors: Jonathan S. Leonard
Abstract: Recent arguments that employment growth occurs disproportionately at small establishments are fundamentally misleading because they confuse regression to the mean with structural shifts in the size distribution of establishments and with an aging effect within cohorts. The net growth usually observed in aggregate studies hides the gross flows; 13 percent of the jobs in existence in 1974 had disappeared by 1980, while 18 percent of the 1980 jobs had not existed six years previously. The variation observed here in labor demand over time within individual establishments may help to explain unemployment.
Keywords: employment growth; establishment size; job creation; labor market; transient shocks
JEL Codes: J23; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Establishment Size (L25) | Employment Growth (O49) |
| Small Establishments (L26) | Higher Growth Rates (O49) |
| Regression to the Mean (C29) | Misinterpretation of Job Creation (J68) |
| Volatility in Labor Demand (J23) | Unemployment (J64) |
| Small Establishments (L26) | Job Losses (J63) |