Job Creation in Europe: A firm-level analysis
This note reports an innovative state-of-the-art empirical analysis of Job Creation in the European Union in the same vein as the classical studies in the United States. It is based on an exceptionally large sample of firm-level employment data in the period 2004-2015 obtained from Orbis, a databank published by Moody’s Bureau van Dijk. Consistently with our representiveness assessment, the final sample consists of firms registered in 20 out of the 28 EU Member States.
The study follows the empirical literature and defines three indicators which may be equally plausible policy objectives. The job creation [destruction] is the total number of jobs created [destroyed] by growing [shrinking] firms and reflects the job turnover of a market and its capacity to enhance the labour market dynamism. The net job creation is the difference between job creation and job destruction and captures the employment growth. The net job creation rate is the employment growth rate and reflects the capacity of firms of being efficient in creating new jobs.
The main findings are as follows:
- The young-SME category is the largest contributor to net job creation (employment growth). Moreover, its contribution to job creation amounts to 40 percent which is far larger than its share in employment amounting to 15 percent.
- The share of start-up firms in employment varies between 2 and 9 percent across countries with new Member States typically exhibiting larger shares. Even though to various degrees, nearly all Member States have experienced a decline of start-ups measured as the share of
employment.
- With nearly 60%, high-growth firms (HGF) exhibit the largest incidence on total job creation. Even though the young HGFs are more numerous, mature HGFs contribute to job creation to a larger extent.
- Firms borrowing for the first time report net job creation rates of about 8 percent higher in the next three years, on average. Besides, the net job creation rates of firms with bank loans are less sensitive to economic cycles.
The results yield a number of policy implications. In particular, they provide empirical support to policies aimed at encouraging young firms and entrepreneurship in Europe. They also show that job creation of SME may face obstacles in their "scaling-up" development phase. Last, the impact of external financing on net job creation rates may vary among Member States -- especially through the business cycles. These results deserve further investigation.
By providing a large-scale investigation of job creation in Europe and providing related policy tools, the report aims to contribute to the European Commission’s first priority, "to boost jobs, growth and investment."
HALLAK Issam;
HARASZTOSI Peter;
2019-03-12
Publications Office of the European Union
JRC115930
978-92-76-00775-3 (online),
978-92-76-07882-1,
1831-9424 (online),
EUR 29689 EN,
OP KJ-NA-29689-EN-N (online),
OP KJ-NA-29689-EN-E,
https://publications.jrc.ec.europa.eu/repository/handle/JRC115930,
10.2760/590043 (online),
10.2760/871457,
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