Longitudinal Business Database Research Articles

Who Creates Jobs? Small vs. Large vs. Young

There’s been a long, sometimes heated, debate on the role of firm size in employment growth. Despite skepticism in the academic community, the notion that growth is negatively related to firm size remains appealing to policymakers and small business advocates. The widespread and repeated claim from this community is that most new jobs are created by small businesses. Using data from the Census Bureau Business Dynamics Statistics and Longitudinal Business Database, we explore the many issues regarding the role of firm size and growth that have been at the core of this ongoing debate (such as the role of regression to the mean). We find that the relationship between firm size and employment growth is sensitive to these issues. However, our main finding is that once we control for firm age there is no systematic relationship between firm size and growth. Our findings highlight the important role of business startups and young businesses in U.S. job creation. Business startups contribute substantially to both gross and net job creation. In addition, we find an “up or out” dynamic of young firms. These findings imply that it is critical to control for and understand the role of firm age in explaining U.S. job creation.

The Longitudinal Business Database

This paper describes recent efforts at CES to create a new longitudinal research dataset: the Longitudinal Business Database (LBD). The LBD is a major improvement over existing longitudinal establishment datasets. Unlike the LRD, which covers only manufacturing, the LBD covers nearly all the non-farm private economy, as well as some public sector activities. Also, research using the LRD found problems with broken longitudinal linkages that lead to spurious establishment births and deaths (Dunne 1992). We supplemented the longitudinal numeric identifiers assigned by the Census Bureau with name and address matching to repair broken linkages.

Measuring and building high-quality entrepreneurship: a research prospectus

This article discusses a detailed research design to measure entrepreneurship quality, as opposed to entrepreneurship quantity, and to develop a standard entrepreneurship quality measure focusing on high-growth small and often new businesses, based on critiques of previous entrepreneurship measures. Available longitudinal establishment-level data sources for building up the entrepreneurship quality index are introduced and evaluated and the Longitudinal Business Database of the US Census Bureau emerges as the best candidate because of its coverage and timely update. The creation and development of the entrepreneurship quality measure will enable researchers to empirically identify a wide range of economic, social, policy, and firm factors that may affect the development of high-quality entrepreneurship. The creation and development of the entrepreneurship quality measure will also enable researchers to uncover the critical role of high-quality entrepreneurship in economic growth in general and in rural development in particular.

Business Dynamics Statistics: An Overview

The Business Dynamics Statistics (BDS) includes measures of establishment openings and closings, firm startups, job creation and destruction by firm size, age, and industrial sector, and several other statistics on business dynamics. The U.S. economy is comprised of more than 6 million establishments with paid employees. The population of these businesses is constantly churning - some businesses grow, others decline, and yet others close. New businesses constantly replenish this pool. The BDS series provides annual statistics on gross job gains and losses for the entire economy, and by industrial sector and state. These data track changes in employment at the establishment level, and thus provide a picture of the dynamics underlying aggregate net employment growth.The Business Dynamics Statistics is a product of the U.S. Census Bureau and was developed by the Center for Economic Studies. The BDS data are compiled from the Longitudinal Business Database (LBD) (Jarmin and Miranda, 2002). The LBD is a longitudinal database of business establishments and firms covering the years between 1976 and 2005 (as additional years of the LBD are available, the BDS will be updated).The LBD is constructed by linking annual snapshot files from the Census Bureau’s Business Register (BR)1 to provide a longitudinal history for each establishment. The linkage process makes use of numeric establishment identifiers as well as probabilistic name and address matching. The linkage process allows the tracking of net employment changes at the establishment level, which, in turn, allows the estimation of jobs gained at opening and expanding establishments, and jobs lost at closing and contracting establishments.The LBD originally was conceived and constructed to be a research dataset. It has been used in numerous studies published in leading scholarly journals. It also has seen increased use as a source of special tabulations. The growing demand for tabulations from the LBD is why the Census Bureau has developed the BDS.

Employer Health Benefit Costs and Demand for Part Time Labor

The link between rising employer costs for health insurance benefits and demand for part-time workers is investigated using non-public data from the Medical Expenditure Panel Survey- Insurance Component (MEPS-IC). The MEPS-IC is a nationally representative, annual establishment survey from the Agency for Healthcare Research and Quality (AHRQ). Pooling the establishment level data from the MEPS-IC from 1996-2004 and matching with the Longitudinal Business Database and supplemental economic data from the Bureau of Labor Statistics, a reduced form model of the percent of total FTE employees working part-time is estimated. This is modeled as a function of the employer health insurance contribution, establishment characteristics, and state-level economic indicators. To account for potential endogeneity, health insurance expenditures are estimated using instrumental variables (IVs). The unit of analysis is establishments that offer health insurance to full-time employees but not part time employees. Conditional on establishments offering health insurance to full-time employees, a 1 percent increase in employer health insurance contributions results in a 3.7 percent increase in part-time employees working at establishments in the U.S.

Introduction to the Special Issue on Economics and Strategy of Entrepreneurship

This special issue is the outgrowth of a 2007 conference, Entrepreneurship: Strategy and Structure, sponsored by the NBER Working Groups on Entrepreneurship and Innovation Policy and the Economy. The aim of the conference and special issue are to provide a forum for rigorous frontier research on the microeconomic and institutional foundations of entrepreneurship, and the strategic and market consequences of entrepreneurial activity. The papers included in the Special Issue include a subset of papers presented at the conference as well as papers submitted as the result of a solicitation for the Special Issue from the journal. As with all special issues in JEMS, all of the articles in this issue have gone through the standard editing and refereeing process that is applied to all submissions to JEMS. We would especially like to thank Dan Spulber, Josh Lerner, and Bob Strom for their help throughout the process, and the Kauffman Foundation for providing support for the original NBER conference. Although traditional research in economics has mostly ignored entrepreneurship, or otherwise equated it with a mechanism for finding market equilibrium, economists have made considerable progress more recently in understanding the economic foundations and consequences of entrepreneurial activity. Applying frontier theoretical and empirical

Agglomeration Elasticities in New Zealand

This paper analyses the relationship between firms’ multi-factor productivity and the effective employment density of the areas where they operate. Quantifying these agglomeration elasticities is of central importance in the evaluation of the wider economic benefits of transport investments. We estimate agglomeration elasticities using the Statistics New Zealand prototype Longitudinal Business Database: a firm-level panel covering the period 1999 to 2006. We estimate that an area with 10 percent higher effective density has firms with productivity that is 0.69 percent higher, once we control for the industry specific production functions and sorting of more productive firms across industries and locations. We present separate estimates of agglomeration elasticities for specific industries and regions, and examine the interaction of agglomeration with capital, labour, and other inputs.

The Role of Retail Chains: National, Regional, and Industry Results

We use the establishment level data in the Longitudinal Business Database to measure changes in market structure in the U.S. Retail Trade sector during the period, 1976 to 2000. We use firm ownership information to construct measures of firm entry and exit and also to categorize four types of retail firms: single location, and local, regional, and national chains. We use detailed location data to examine market structure in both national and county markets. We summarize the county level results into three groups: metropolitan, micropolitan, and rural. We find that retail activity is increasingly occurring at establishments owned by chain firms, especially large national chains. On average, we find that all types of retail firms are increasing in size during the period. We also find that larger markets experience more firm turnover. Finally, we see that entry and exit rates vary across two-digit retail industries.

Integrated Longitudinal Business Database: Presentation

The Integrated Longitudinal Business Database is an extension of the Longitudinal Business Database, a longitudinal data set of all employer business establishments from 1975 through 2005 constructed at the Census Bureau's Center for Economic Studies.

Integrated Longitudinal Business Database: Data Overview

The Integrated Longitudinal Business Database is an extension of the Longitudinal Business Database, a longitudinal data set of all employer business establishments from 1975 through 2005 constructed at the Census Bureau's Center for Economic Studies. Download the slides at: http://papers.ssrn.com/paper=1028258 Download the audio file at: http://papers.ssrn.com/paper=1028842

Do Employment Protections Reduce Productivity? Evidence from U.S. States

Theory predicts that mandated employment protections may reduce productivity by distorting production choices. Firms facing (non-Coasean) worker dismissal costs will curtail hiring below efficient levels and retain unproductive workers, both of which should affect productivity. These theoretical predictions have rarely been tested. We use the adoption of wrongful-discharge protections by U.S. state courts over the last three decades to evaluate the link between dismissal costs and productivity. Drawing on establishment-level data from the Annual Survey of Manufacturers and the Longitudinal Business Database, our estimates suggest that wrongful-discharge protections reduce employment flows and firm entry rates. Moreover, analysis of plant-level data provides evidence of capital deepening and a decline in total factor productivity following the introduction of wrongful-discharge protections. This last result is potentially quite important, suggesting that mandated employment protections reduce productive efficiency as theory would suggest. However, our analysis also presents some puzzles including, most significantly, evidence of strong employment growth following adoption of dismissal protections. In light of these puzzles, we read our findings as suggestive but tentative.

Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms [with Comments and Discussion

We study the variability of business growth rates in the U.S. private sector from 1976 onwards. To carry out our study, we exploit the recently developed Longitudinal Business Database (LBD), which contains annual observations on employment and payroll for all U.S. businesses. Our central finding is a large secular decline in the cross sectional dispersion of firm growth rates and in the average magnitude of firm level volatility. Measured the same way as in other recent research, the employment-weighted mean volatility of firm growth rates has declined by more than 40 percent since 1982. This result stands in sharp contrast to previous findings of rising volatility for publicly traded firms in COMPUSTAT data. We confirm the rise in volatility among publicly traded firms using the LBD, but we show that its impact is overwhelmed by declining volatility among privately held firms. This pattern holds in every major industry group. Employment shifts toward older businesses account for 27 percent or more of the volatility decline among privately held firms. Simple cohort effects that capture higher volatility among more recently listed firms account for most of the volatility rise among publicly traded firms.