Net Employment Growth by Firm Size and Age in Italy

Abstract

We study how net employment growth rates differ by firm age and size. For this purpose, we exploit a long panel dataset collecting information for all Italian private firms with at least one employee. We find that firm size is not a crucial determinant of firm growth, once age is controlled for. Firms in their early years of life (up to 3 years) display higher growth rates and slightly higher exit rates than older firms. This up-or-out dynamic of Italian firms seem subdued if compared with the US, the other country for which a similar analysis is available. We also exploit the long time series to identify which types of firms are hit the most during economic downturns. Results show that older firms reduce net employment growth the most. The impact on younger firms seem partially cushioned by stronger selection at entry. Conditional on age, size turns out not to be significantly correlated with the drop in net employment growth rates during downturns.