JOB CREATION AND JOB DESTRUCTION BY SMALL FIRMS - AN EMPIRICAL-INVESTIGATION FOR THE DUTCH MANUFACTURING SECTOR

This paper studies the differences in behaviour of small and large fir ms, concerning job creation and job destruction, in the Dutch manufact uring sector over the period 1978-1991. We find that both job creation and job destruction rates are higher in small firms than in large one s. In addition, we found that the persistence of jobs created in slump s are much higher for small firms than for large firms. Persistence ra tes of job destruction are, however, less connected to the state of th e business cycle and increase with firm size. More importantly, small firms seem to reallocate their jobs in a continuous way, as job turnov er moves independent of the business cycle. Large firms, on the other hand, reallocate counter-cyclically. An obvious explanation for this p henomenon is that small firms are better equipped to adjust to shifts in economic circumstances. Large firms adjust only slowly and for them reallocating jobs in a recession is more advantageous than in a boom.