Assessing Job Flows across Countries: The Role of Industry, Firm Size, and Regulations

This paper reviews the process of job creation and destruction across a sample of 16 industrial and emerging economies over the past decade. It exploits a harmonized firm-level data set drawn from business registers and enterprise census data. The paper assesses the importance of technological factors that characterize different industries in explaining cross-country differences in job flows. It shows that industry effects play an important role in shaping job flows at the aggregate level. Even more importantly, differences in the size composition of firms-within each industry-explain a large fraction of the overall variability in job creation and destruction. However, even after controlling for industry/technology and size factors there remain significant differences in job flows across countries that could reflect differences in business environment conditions. The authors look at one factor shaping the business environment, namely, regulations on hiring and firing of workers. To minimize possible endogeneity and omitted variable problems associated with cross-country regressions, we use a difference-in-difference approach. The empirical results suggest that stringent hiring and firing costs reduce job turnover, especially in those industries that require more frequent labor adjustment. Regulations also distort the patterns of industry/size flows. Within each industry, medium and large firms are more severely affected by stringent labor regulations, while small firms are less affected, probably because they are partially exempted from such regulations or can more easily circumvent them.

Bibliographic Details

Main Authors:	Haltiwanger, John, Scarpetta, Stefano, Schweiger, Helena
Language:	English en_US
Published:	World Bank, Washington, DC 2006-11
Subjects:	AFFECTED WORKERS, BUSINESS ENVIRONMENT, COUNTRY EFFECTS, COUNTRY LEVEL, CREATIVE DESTRUCTION, CROSS-COUNTRY ANALYSES, CROSS-COUNTRY DIFFERENCES, DOWNSIZING, ECONOMETRIC ANALYSIS, ECONOMIC DEVELOPMENT, EMPIRICAL ANALYSIS, EMPIRICAL EVIDENCE, EMPIRICAL RESULTS, EMPIRICAL STUDIES, EMPLOYMENT, EMPLOYMENT GROWTH, EMPLOYMENT PROTECTION LEGISLATION, ENTERPRISE RESTRUCTURING, ENTRY COSTS, FIRING COSTS, FIRM DYNAMICS, FIRM ENTRY, FIRM EXIT, FIRM SIZE, FIRM TURNOVER, HIGH CORRELATION, JOB CREATION, JOB DESTRUCTION, JOB DESTRUCTION RATE, JOB FLOWS, JOB LOSSES, JOB REALLOCATION, JOB TURNOVER, JOBS, LABOR ADJUSTMENT, LABOR ADJUSTMENT COSTS, LABOR MARKET, LABOR MARKET REGULATIONS, LABOR MOBILITY, LABOR REALLOCATION, LABOR REGULATIONS, LABOUR, LATIN AMERICAN, MEASUREMENT ERRORS, NEGATIVE EFFECT, NET EMPLOYMENT, POLICY ENVIRONMENT, POLICY RESEARCH, PREVIOUS SECTION, PREVIOUS STUDIES, PRIVATE FIRMS, PRODUCING GOODS, PRODUCT MARKET, PRODUCT MARKET REGULATIONS, PRODUCT MARKETS, PRODUCTION PROCESS, PRODUCTIVITY GROWTH, RELATIVE IMPORTANCE, SELF EMPLOYED, SERVICE INDUSTRY, SIGNIFICANT DIFFERENCES, SIZE OF FIRMS, SMALL FIRMS, TOTAL EMPLOYMENT, UNEMPLOYMENT, WAGE BARGAINING, WORKERS,
Online Access:	http://documents.worldbank.org/curated/en/2006/11/7208859/assessing-job-flows-across-countries-role-industry-firm-size-regulations https://hdl.handle.net/10986/8873
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