Entry, exit and net job creation in Tunisia: an exploratory analysis

Abstract

This paper analyzes the impact of small firms’ entry and exit dynamics on net job creation in Tunisia during 2000–2013. Our descriptive and exploratory econometric analyses exploit a database of the population of Tunisian firms; the results support the idea that small firms in a developing country, such as Tunisia, play a key role in the creation of new jobs. We also explore the role in these dynamics of a specific tax regulation, the regime forfaitaire, which has been designed to benefit only small firms. We find that small firms benefiting from this taxation scheme account for most of the job creation effects for this firm size group. This effect is persistent across sectors. However, despite their dynamism, small firms show very weak economic performance. Thus, this preliminary analysis suggests that small firms in Tunisia have a strong social impact in the form of new job creation, but a weak economic impact in terms of wealth creation. A possible interpretation of these findings and one which requires further investigation, is that small firms’ entry rates are driven mostly by necessity entrepreneurs, while the skilled workforce, which currently is largely unemployed, does not contribute to this process through the creation of innovative start-ups.