Enterprise dynamics and employment growth

Abstract

This chapter investigates how employment outcomes vary with respect to firm size, age and sector and over time. It provides an in‐depth analysis of formal private sector enterprises in 132 developing, emerging and developed economies by identifying the types of firms (by size and age) that created and destroyed jobs during the pre‐ and post‐crisis periods. The chapter finds that both firm size and age are related to the employment situation. In particular, relative to SMEs, large enterprises are the principal source of employment in the formal private sector. But SMEs and young firms are more dynamic than large firms, both with respect to employment growth and as an important source of employment and firm ownership, particularly women. Since the crisis, for certain types of employment the contribution of young firms and SMEs has declined, owing in part to the faster rate of job destruction seen in SMEs relative to large enterprises. Finally, region‐specific (and by extension country‐specific) characteristics play a stronger role in influencing firm size than the specific sectoral composition.These findings shed light on the importance of an enabling environment for enterprise survival and growth. Indeed, there is a need for policies to better promote SMEs’ and young firms’ access to resources, particularly in the post‐crisis era.