Arnold Kling

Job Creation Puzzle

Arnold Kling, Great Questions of Economics
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John S. Irons asks why, if small firms create most of the jobs in the economy, the share of employment in small firms does not go up.

Given these numbers, you'd expect the total employment share in firms with less than 20 people would have been growing over time, and the share of the 500+ group to decline. Right?


I would speculate that one answer could be that although job creation is faster at small firms, job destruction also is faster at small firms. When you net out jobs lost due to firms going out of business or laying off workers, the employment share of small firms may not tend to rise.

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